New tax rules for stock options coming soon, Bill Morneau says

Finance Minister Bill Morneau said he will release details in the 'near term' on his plans for changes in the taxation of stock options.

Accountant advises exercising stock options this year to avoid potential tax hit

Minister of Finance Bill Morneau speaks to reporters at the G20 Summit in Antalya, Turkey. He said he'd have details soon on changes to stock options taxation. (Sean Kirkpatrick/Canadian Press)

Finance Minister Bill Morneau said he will release details in the "near term" on his plans for changes in the taxation of stock options.

Speaking at the G20 summit in Antalya, Turkey, Morneau said he wants to move quickly to eliminate uncertainty over the matter.

 "We will do it in a way that responsibly deals with the issues that current holders of stock options might have," Morneau was quoted as saying by Bloomberg.

The Liberals pledged to increase tax on stock options in their platform, but have not said by how much or if any rules would be grandfathered. Prime Minister Justin Trudeau has urged Morneau to have rules for a new tax regime in place by Jan. 1, including raising the tax on the highest income earners, which is currently at 29 per cent.

Consultancy PricewaterhouseCoopers has recommended that Canadian employees exercise their stock options as soon possible to lock in a favourable tax treatment.

Currently, employees paid in stock options claim only half the value of the stock as income. The Liberals haven't suggested what how they might change that rule.

"The federal Liberal party has pledged to cap the amount that employees can claim through stock option deductions, although 'employees with up to $100,000 in annual stock option gains will be unaffected.' Details on how and when this change will be made are not yet known," PwC said in a note to clients.

It warns that people making over $200,000, who are likely to have their overall income tax bracket raised under the Liberals, should plan carefully.

Among those with the greatest potential to be hit by a plan to increase taxation on stock options are company executives, who may get a large part of their compensation from stock options.


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