Tomorrow, tax changes to Employee Share Schemes (ESS) begin.
These changes to the employee share scheme framework build on our Growing Jobs and Small Business package to support innovation and to create the right conditions for Australian entrepreneurs.
Every single day I speak with hardworking Australians who are involved in start-ups across our country. I am inspired by their courage and their commitment to growing their enterprise and supporting their employees. Each of these entrepreneurs share a passion that we are committed to encouraging.
The Government’s Growing Jobs and Small Business package is about supporting innovation and creating the right conditions for Australian entrepreneurs. The changes to ESS will allow innovative Australian firms to attract and retain high quality employees in a globally competitive labour market.
These changes unwind the harm caused by the former Labor Government’s amendments to the taxation of options issued under an employee share scheme. Our changes mean the tax on the options is paid when the option is converted to a share, so there is an actual material value on the options.
As well as this, the Government has introduced a new incentive that will allow further deferral of the taxing point where eligible start-up companies issue shares or options to their employees at a small discount.
To ensure we are reducing the impact of red tape burdens on small businesses, the Abbott Government has also made additional amendments to simplify the process of establishing and maintaining an employee share scheme. From today, start-up companies can use standard templates created by the Australian Taxation Office (ATO) to offer employees options in their company.
The ATO has made available templates for an Employee Option Plan and an Employee Letter of Offer. Employers can download the templates from the ATO website, fill in the blanks and offer their employees options to buy shares in the company.
A safe harbour market valuation methodology has also been developed to give certainty to start-ups that are valuing their company.
The tools for start-ups have been developed through extensive consultation with industry.
By providing these tools we are freeing up start-up companies to get on with what they are best at-innovating. We are committed to ensuring Australia is the best place to start and build a business.