News & Analysis

Australian Government reviewing startup employee share options

- January 22, 2014 < 1 MIN READ

Responding to concerns raised by startups, the Australian Government has decided to review tax rules surrounding employee share options.

On Tuesday, the Treasury announced that they will begin direct consultations with interested stakeholders for two weeks starting from the 28th of January. Stakeholders in Melbourne and Sydney have the opportunity to comment on issues relating to the existing Employee Share Scheme arrangements for startups; and those unable to attend have the option of participating via teleconference.

Changes to tax rules made three years ago under Labor leadership discouraged startups from providing employee share options to employees – a non-cash incentive for attracting and retaining staff in Australia.

Following the Coalition’s election win, startups gained newfound optimism about the issue being addressed under Liberal leadership. This was reinforced by current Communications Minister Malcolm Turnbull’s pledge.

At the launch of muru-D, a startup incubator funded by Telstra, Mr Turnbull commented that the changes in tax rules made three years ago was “a major disincentive to startup businesses in Australia” and that we need to have a tax system that encourages startups to issue stock to employees.

According to the Treasury’s invitation to comment, discussions on employee share options will focus on:

  • What effect the 2009 changes to tax had on startups
  • What the barriers are to offering an employee share scheme and what steps need be implemented to overcome these barriers
  • The economic benefits of implementing these steps
  • How to define a startup
  • Other costs or issues associated with the implementation of an employee share scheme

Submissions are due by the 7th of February and can be made online through the Treasury’s website. Click here for more information


Image: Parliament House, Canberra. Source: Shutterstock.