14 January 2015
Media Release - #2015002, 2015

Employee Share Scheme unleashing enterprise

The Government is committed to supporting innovation and creating the right conditions for Australian entrepreneurs.

As part of our commitment, the Government will improve the taxation arrangements for Employee Share Schemes.

I am pleased to announce the release of draft legislation to enact our amendments to the Employee Share Schemes.

We have designed these changes to increase the international competitiveness of our tax system and allow innovative Australian firms to attract and retain high‑quality employees in the globally competitive labour market.

We have listened to enterprising Australians during extensive consultations, and we have heard time and time again that the current taxation regime for Employee Share Schemes is uncompetitive and unattractive.

We need to be able to compete with other countries such as the UK and the USA to land new enterprise and livelihood opportunities here. The current arrangements are impeding innovation and entrepreneurship in our economy.

The way we’ve done business in the past around ESS is not conducive to the commercialisation of great Australian ideas. It simply hasn’t enabled unleashing the ‘have a go’ enterprising spirit of Australians to enhanced local growth, economic and employment potential.

This is why we will unwind the harm caused by the former Government’s amendments to the taxation of options issued under an Employee Share Scheme.

In past options were taxed when they were provided to the employee. There was no real way of determining their true values, which meant that employees were hit with a substantial tax liability, even though there was no material capacity to generate the resources to pay it.

Our amendments mean that the tax on the options is paid when there is an actual material value on the options.

As well as this, the Government will allow eligible start-up companies to issue shares or options to their employees at a small discount. We will make that discount generally exempt from up-front taxation.

To ensure we are reducing the impact of red tape burdens on small businesses, the Abbott Government will also make additional amendments to simplify the process of establishing and maintaining an Employee Share Scheme.

The draft legislation to enact these amendments can be found on the Treasury website.

Consultations on this legislation are open. I encourage all interested businesses and employees to make submissions via the Treasury website (www.treasury.gov.au).

Written submissions close on 6 February 2015.