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Startups win reform in Abbott's competitiveness agenda

Tuesday, 28 Oct 2014

The Australian government will reform how employee share options are taxed to make it easier for startups to attract and retain talent, as part of a $400 million Industry Innovation and Competitiveness Agenda unveiled today by Prime Minister Tony Abbott.

The legislation will come into effect 1 July 2015, following consultations between the Treasurer and industry.

The government will reverse tax rule changes made under Labor in July 2009 that have discouraged Australian startups from providing employee stock ownership plans (ESOPs) to employees, said Abbott. They required that the employee is taxed on the value of the share option when it is issued, before any payments are made.

“They are a very important way of getting clever people into startup businesses,” Abbott said.

The change will apply to all companies and mean that options won’t be taxed until the employee executes the option. This is better for cash-poor early stage startups, which can use share options as an alternative to a larger salary.

Read the full story by Computerworld at http://www.computerworld.com.au/article/557298/australian-startups-win-reform-abbott-competitiveness-agenda/