Incentives: Australia and Germany updates

We have collated recent changes in this newsletter which may impact companies operating share plans in the countries below. This information is intended as a summary only.

DLA Piper Lookout, our global share plans platform, is also available to help companies obtain and review legal and tax advice for the jurisdictions in which they operate their plans. See Lookout for more information and contact dlapiperlookout@dlapiper.com for a demonstration.

Australia

Our June 2022 update Employee Equity Incentives Update explained significant changes to the securities laws and tax rules relating to incentive plans. On 20 December 2022, the Australian Securities & Investments Commission (ASIC) also introduced a regulatory instrument to address technical deficiencies with the new regulations. From 1 March 2023, companies are no longer able to rely upon an ASIC Class Order when granting new awards (historically reliance upon a Class Order was a common approach taken by many companies) and will instead need to rely upon a new exemption in the Corporations Act 2001 for employee share plans (or one of a number of other long-standing exemptions in the Corporations Act which have not changed).

Germany

On 12 April 2023, a first draft of the Future Financing Act (the Act) was published. As drafted, the Act will increase the existing income tax exemption for all-employee share plans to EUR1,400 to EUR5,000 per employee per calendar year. The value of this exemption was increased relatively recently, the limit being EUR360 until 1 January 2021.

This Act also contains a proposal to extend an existing income tax deferral for share awards so that it applies regardless of which group entity’s shares are offered. Currently the deferral applies only to awards which relate to shares in the German employer. The Act would also widen the eligibility criteria applicable to the deferral such that the employing company must have (i) fewer than 500 employees (currently 250 employees), (ii) an annual turnover of up to EUR100 million (currently EUR50 million) or a balance sheet of up to EUR86 million (currently EUR43 million) and (iii) been incorporated for no more than 20 years (currently 12 years). If eligible, income tax is deferred until the earlier of (i) the sale of the shares, (ii) the employee leaving or (iii) the expiry of a 12 year period since the employee acquired the shares (the Act proposes to increase this to 20 years). The Act also contains a proposal that a reduced income tax rate be applied when the deferred tax point arises.

The Act is currently under consultation and if it comes into force, would not become effective until the start of 2024 at the earliest.