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Australian Firms Welcome ESS Tax Reforms

by Mike Godfrey, Tax-News.com, Washington

19 January 2015


The Australian Chamber of Commerce and Industry (ACCI) has welcomed the Government's proposed changes to the tax treatment of Employee Share Schemes (ESS) as "a stand-out win for entrepreneurs and start-ups."

The Coalition Government is consulting on draft ESS legislation, which would reverse some of the changes made in 2009 by the Labor administration. Under the 2009 rules, options are taxed when they are provided to an employee. The Government intends for the tax point to occur when there is an actual material value to be derived from the options. In addition, it has proposed that eligible companies could issue shares or options to their employees at a small discount. This discount would generally be exempt from up-front taxation.

John Osborne, ACCI Director of Economics and Industry Policy, said: "We can no longer let the tax system starve our small business start-ups of the vital cash flow they need to grow and reach critical mass. Reversing harmful changes made in 2009 by the then Government is a stand-out win for entrepreneurs and start-ups. Allowing options to be taxed when they are converted to shares and not when an employee receives them, will help smaller innovative businesses to use them to attract top talent and accelerate growth."

"Fixing the mess with employee share schemes is something that the Chamber has strongly advocated for with both government and the opposition over many years and we are confident that we will be able to reach a compromise."

Rob Basker, Deloitte Australia Global Employer Services Partner, said that the firm has consistently urged "a holistic view of the [2009] ESS changes, and not just a simplified solution." He therefore welcomed the Government's attempt to address the start-up community's concerns.

However, as Basker pointed out, "one question remains on the definition of a start-up, which may need to be rethought. If there is an aggregate turnover threshold and an incorporated maximum period of ten years, does it matter if a company is listed or not?"

TAGS: tax | small business | economics | business | tax incentives | share schemes | entrepreneurs | employees | Australia | small and medium-sized enterprises (SME) | legislation | tax breaks | tax reform | trade association | trade | services

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