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While more companies are opting to give their employees shares as part of their total remuneration package, education around what this means come tax time is of the utmost importance.
Emma Baxter, the founder and director of tax and financial wellbeing provider YOUtax, emphasizes the growing need for financial literacy among employees. Speaking on a recent episode of The HR Leader Podcast, produced in partnership with YOUtax, she discussed the notion of bigger organisations providing shares to their employees and delved into what companies can be doing to educate their staff on the tax implications of these benefits.
“Over the last few years, we’ve seen more employees become confused around employee share plans and other share-based benefits,” Baxter noted. “Many have been educated simply because of a bad experience, such as receiving shares and then facing a hefty tax bill at the end of the financial year.”
There are some companies providing webinars and presentations and educating their employees, including bringing in a tax adviser to advise employees on their unique circumstances. “No two employees, from a tax perspective, are the same, even though the salary packages may be similar. So, the way that [these benefits] affect an individual are different. However, from my experience over the last three to four years, we've seen a lot of employees who are unaware or don't understand how the reporting [of these benefits] goes to the ATO and how the ATO reports it through their taxes,” Baxter explained. “Everyone goes to their tax agent and their employee payment summary is pre-filled and they go, okay, my employee payroll summary is in there.”
However, if you have restricted share units, it may take longer to pre-fill. So, an employee may not know till 12 months later that they had other income to report that they were not aware of. “We've seen employees with over $100,000 tax bills being unaware of how they needed to report or at what timing of the year should they be. Seeing a tax advisor on an issue that is not your standard once-a-year appointment.”
Companies that provide share-based compensation should invest in educational resources and support services. “Providing webinars, presentations, and access to tax advisors can help employees navigate the tax implications of their benefits,” Baxter suggested. “This proactive approach can prevent tax bill shocks and ensure employees are well-prepared.”
Baxter also highlighted the role of HR teams in facilitating this education. While HR professionals may not be qualified to give tax advice, they can steer employees towards the right resources. “Instead of the usual ‘seek your own advice’ warnings, companies should bring in specialists who understand the intricacies of their salary packages,” she advised.
In conclusion, as modern salary packages become more complex, the need for comprehensive education and support grows. Employers must recognize their responsibility to provide this support, ensuring employees can fully benefit from their compensation packages without unexpected financial burdens.
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