Startups, prepare to say goodbye to Labor’s employee share scheme
The business media has been quick to pick up a story published on the Australian Financial Review revealing that the stringent tax rules relating to employee share programs may be meeting its timely demise.
Changes to tax rules were made in 2009 under Labor leadership to stop high-income executives (earning over $180,000 per annum) from minimising their tax.
But the tightening of tax rules also discouraged startups from providing employee share options to employees – a non-cash incentive for attracting and retaining staff in Australia.
Startups often trade equity to employees to compensate for lower salaries and high-intensity work environments. But Labor’s changes left many with an upfront tax bill on shares.
The Abbott government is now said to be revoking rules that require employees to face immediate tax costs on share options they receive from employers. New laws may be reminiscent of the UK government Sharesave scheme which has been credited with helping startups in the region.
According to the AFR, the new scheme could also have eligibility rules based on income and employer size.
The changes are likely to be announced this month as part of the National Industry Investment and Competitiveness Agenda.