Australian start-ups praise government's ESS changes

DAVID SWAN MARCH 26, 2015 12:00PM

Australia's start-up industry has praised proposed changes to the Employee Share Schemes put forward by the federal government.

The move, proposed by small business minister Bill Billson means means from July 1 employees issued with share options will be able to defer paying tax until they are exercised and converted into shares, rather than paying tax up front.

Eligible start-up companies will also being offered a tax discount on employee options and share schemes.

The government is also extending the maximum time for tax deferral from seven to 15 years, which Small Business Minister Bruce Billson says will give companies more time to build their businesses and succeed.

The change in tax arrangements would allow new companies to grow in Australia, rather than being forced overseas in search of more competitive tax regimes.

"Having long advocated for action in this space, StartupAUS welcomes the proposed changes to Employee Share Schemes put forward by Minister for Small Business Bruce Bilson to Parliament today," StartupAUS director Peter Bradd said.

"We also welcome his announcement of the government's intention to help attract and retain talent for innovative companies and make Australia's startup eco-system globally competitive.

"It is encouraging to see the government recognise the potential of Australian tech startups, and take steps to rectify the tax treatment of share schemes. Changes to the ESS will help Australian startups become strong drivers of increases in job creation and, because many help to drive technological change, this will lead to productivity gains and job creation for our economy.

"Australian startups are key in shifting to our industry base from an extractive economy to a sustainable, knowledge-led economy. Changes to the ESS are a vital step in this long process."

Victoria's peak start-up body too praised the proposed changes.

"Appropriately structured share schemes for early employees allows everyone in the business to reap the rewards when a business is successful," Startup Victoria's Scott Handsaker told Technology Spectator.

"We know from the US that when a successful exit is shared across the employees, that the result is an acceleration in new company formation and innovation.

"We welcome the changes to the ESS."