June 17 (Bloomberg) -- Macquarie Group Ltd., Australia’s biggest investment bank, said it will defer new pay arrangements for senior managers as it awaits the outcome of tax changes.

The Australian government, in its May 12 federal budget, said it wanted to make employees pay taxes on share options granted by employers when they are allocated. Employees can currently defer the tax until the options are exercised. On May 25, the government said it will review the proposal after opposition from unions and companies.

Macquarie said May 21 the proposed changes may have an “adverse impact” on the firm’s ability to change its compensation system. Dubbed the “Millionaire’s Factory” during a 16-year run of rising profit, Macquarie said March 31 it would cut cash bonuses for about 300 senior managers and increase the proportion of performance pay in stock, requiring it to issue as much as A$500 million ($395 million) in new equity.

The company will defer those changes, which were to be voted on at its annual general meeting on July 29, as it awaits final legislation, it said in a statement today. Interim pay arrangements will remain in place in the mean time, it said.

The government is seeking to restrict executive salaries and severance payments after reports of companies giving managers raises while firing workers stoked public anger.

To contact the reporter on this story: Malcolm Scott in Sydney at mscott23@bloomberg.net

Last Updated: June 16, 2009 20:29 EDT