There’s a report in the AFR today that claims the new employee share scheme legislation which is due to come into play from July 1 will limit bureaucracy and paperwork, something startups have been concerned about.
Small Business Minister Bruce Billson said: “We want as few hurdles as possible to people wanting to embrace employee share schemes.”
He said the bureaucracy and paperwork involved in the system will also be streamlined.
Simplifying the system to ensure startups don’t have to foot big bills from valuers, consultants, lawyers or accountants in order to navigate it was one of the ecosystem’s biggest concerns with the draft legislation.
Under the new ESS legislation, which was introduced to parliament today, startups with an annual turnover of less than $50 million, which aren’t listed on the stock exchange and are less than 10 years old will be able to defer paying tax until options are exercised and converted into shares.
The former Labor government introduced up-front taxation on employee share options back in 2009. It was a change which was aimed at big companies but small tech companies, which relied on options to attract and retain talent, got caught in the web. The legislation introduced today aims to roll back these changes which meant employees were forced to pay tax often before any benefit was realised.
Eligible startups will also be able to access a tax discount on employee options and share schemes and the maximum time for tax deferral will be extended from seven to 15 years.
Billson told parliament on Wednesday that employees were also being taxed on something that was difficult to value and may not even result in any benefit.
“Our government knows that our country’s tax system should not be an impediment for innovative companies,” Billson told parliament today.
“We are missing opportunities every single day.”
Here’s Billson’s parliamentary address.
These changes are estimated to cost the budget $200 million over four years.
The Federal Government is also planning to extend a promised tax cut of at least 1.5% to all small businesses, regardless of whether they’re incorporated or not.
“We’re keen to make sure that the incentives of a tax cut reaches beyond incorporated businesses into businesses that operate under other structures,” Billson said.
There’s more here.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.