As Peter Costello puts the finishing touches to his May budget, he
should be well pleased that Leighton Holdings boss Wal King is
delivering him a $12 million windfall – probably the biggest single
PAYE cheque paid in the history of Australia.
Crikey speculated about Wal’s tax planning yesterday as we were
perplexed as to why he would want to leave such a a huge amount of
bonuses sitting inside the company over a long preiod. Our cynical
source suggested that if Wal had ever had the unfortunate experience of
being terminated, he would have been able to access the deferred
bonuses at the discounted 21.5 per cent rate that normally applies to
Alas, we’ve heard back from the Leighton spindoctor who stresses that “Wal has not been (and will not be) terminated”.
Does that mean $12.27 million is headed to Canberra? “Leighton Holdings
deducted the full 48.5% tax rate from the $25.3 million before payment – a
nice little bonus for Peter Costello – and the payment as stated in our
release was a straight deferred incentive bonus for 13 years of performance
plus accumulated interest for the period,” the spinner said.
This means “no tax compensation” for Wal and shows that he has
seriously missed the boat that most CEOs have been on since John Howard
halved the capital gains tax rate five years ago. Hundreds of millions of dollars have been leached from the PAYE tax
system since CEOs started getting bonsuses in the form of free shares,
which are then sold after the mandatory 12 months and literally attract
half the tax rate paid by your average Joe on Australia’s ludicrously
punitive income tax scales.
Now you can probably call me a hypocrite in this regard as I’ve
structured the Crikey sale agreement to maximise the capital gain and
minimise the income – as any same person would do when selling a
business. However, your average CEO is not selling a business when he
receives those free shares, he/she is being paid in liquid capital,
something that is not available to the owners of small business.