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Australia Consults On Employee Share Schemes

by Mary Swire, Tax-News.com, Hong Kong

05 August 2013


The Australian Government is consulting on possible reforms to the employee share scheme (ESS) system, with the aim of providing greater assistance to start-up companies.

A new discussion paper, "Employee Share Schemes and Start-Up Companies," covers areas including the point at which employee shares attract taxation, set-up costs, and valuation issues.

According to the paper, the current tax arrangements, which require tax to be paid when shares or options are acquired rather than upon their disposal, are regarded by many as "inconsistent and out of step with global practice." This has ramifications for start-ups, as few "will actually achieve full size as a sustainable company and realize their full potential."

This means that tax must be paid "on shares that may never have a convertible or realized value to the employee," and that employees "are often provided shares or options for little or no upfront cost but do not have funds available to pay the resulting tax bill."

In response to these industry concerns, the Government is considering range of changes. As part of this consultation, it is seeking feedback on four potential options.

These are: retention of the current arrangements; deferral of the taxation point or payment of tax; an increase in the ESS up-front discount; or the taxation of ESS for start-ups at a lower rate.

Unveiling the paper, Assistant Treasurer David Bradbury, said: "We want to ensure we have a flexible and simple incentive system for employees but protect the integrity of the Australian taxation system. We want to hear industry's views on the merits of the various reform options."

Submissions can be until August 30.

TAGS: compliance | tax | small business | business | tax compliance | tax incentives | revenue guidance | share schemes | employees | Australia | ministry of finance | small and medium-sized enterprises (SME) | tax rates | tax breaks | revenue statistics | micro business | tax reform | trade association | trade

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