FINALLY: The Employee Share Scheme Australian Startups Hate Is Being Thrown Out

The Abbott government could be relaxing tax arrangements around employee share programs which have been the a pet hate of Australia’s startup scene since the legislation was introduced under Labor in 2009.

According to the AFR changes would mean employee’s shares would be taxed when they’re sold. The new scheme could also include eligibility rules such as income levels or number of employees so it can be targeted at startups and not place additional strain on the Federal Budget.

It is understood the changes will make Australia’s employee share options plan similar to the UK government’s Sharesave scheme.

Many Australian startups have openly trashed the employee share scheme – in the past saying it strangles their ability to hire good talent. Many have been campaigning for its demise since its introduction about five years ago.

According to the AFR that day is drawing closer, with the new tax arrangements expected to be announced as part of the Federal Government’s National Industry Investment and Competitiveness Agenda. And while there probably won’t be riots in the streets of Australia’s techy neighbourhoods, there will be up to 400,000 employees with shares in the company they work for who could to be better off.

Freelancer founder Matt Barrie told Business Insider Julia Gillard’s employee share ownership plan arrangements were a “fiasco” which were aimed to limit execs minimising their tax but inadvertently caught out startups.

“She wiped out the tech industry’s main form of remuneration,” Barrie said.

“It’s a way of wealth distribution from owners to shareholders.”

But with the tax rules relaxed Barrie said “local startups will be more competitive hiring talent compared to the multinationals” including Google and Apple who are “hoovering up” Australian skilled tech workers and sending them overseas.

Tank Stream Labs investment manager Rui Rodrigues told Business Insider while the details of the employee share scheme rollback aren’t clear it is an important step startups in Australia need.

“Employee share schemes are an extremely effective tool to attract talent, particularly in startups who at a very early stage don’t necessarily have the resources to compete with the market salaries to attract the best technical talent,” he said.

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