What are the biggest issues facing employee ownership in Australia

by Employee Share Ownership on January 3, 2018

Late in 2017, Employee Ownership Australia (EOA) conducted a survey of 68 companies across all sectors to determine the biggest issues facing employee ownership in Australia. Given the recent changes in legislation around employee ownership we were keen to understand if there were any remaining barriers for listed companies to advocate for.

EOA found that tax at cessation of employment is the biggest barrier to long term employee ownership, and in a changing and increasingly mobile work force its effects will only continue to increase.

Discussion at the subsequent EOA breakfast seminar to consider the findings of the research report also confirmed that this issue should be the primary focus of any legislative changes.

“Our findings indicate that removing tax at cessation for all leavers will encourage long term owners and savers. The jury is still out on whether withholding tax is the answer but at the very least it should be available for companies that want to implement it (similar to the New Zealand model)”, said EOA Chair, Angela Perry.

“We also found that the tax exempt plan and current $1,000 limit is too low, however an increase could be implemented with no or low revenue cost to Government if it is applied only to free shares. This plan is focused on lower income employees so this should be considered a positive outcome.”

Lastly, it was considered that increasing the salary sacrifice plan could have a significant impact on employee savings and retirement wealth above the current $5,000. To ensure that it helps the right bracket of employees an income cap could be applied to any value above $5,000 (similar to the cap in the tax exempt plan so that it is simple for companies to administer).

EOA would like to thank everyone who participated in the breakfast seminar as the discussion was incredibly valuable in informing how to best advocate for the proposed changes in the employee ownership landscape.”

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