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Employee share scheme changes pass Australian parliament

Changes to the employee share scheme, designed to make it easier for startup employees to reap the benefits of their employers' success, have passed the Australian parliament.
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Written by Josh Taylor, Contributor on

The Australian parliament has passed legislation that the government hopes will foster new startups in Australia by making it easier for companies to offer shares to employees.

Under changes made in 2009, shares in a company offered to employees were, by default, taxed upfront in the years that the shares were offered. This made it difficult for startups to offer new employees shares at the point of employment in exchange for a reduced salary.

The Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015, which passed the parliament on Thursday, will go into effect on July 1, allowing employees to defer tax until they exercise their options, rather than upfront. The maximum deferral period has been increased from seven years to 15 years.

Startups will also be able to issue options or shares to employees at a small discount.

The impact of the legislation will cost the Budget bottom line AU$196 million over the next three financial years.

Minister for Small Business Bruce Billson said at the time the legislation was introduced into parliament that the scheme would stimulate growth of startups in Australia.

Peter Bradd, director of Australian technology startup advocacy group StartupAUS, said earlier this year that the changes are a step in the right direction.

"Changes to the ESS will help Australian startups become strong drivers of increases in job creation, and, because many help to drive technological change, this will lead to productivity gains and job creation for our economy," he said.

"As a nation, we need to invest and foster our startup ecosystem. Australian startups are key in shifting to our industry base from an extractive economy to a sustainable, knowledge-led economy. Changes to the ESS are a vital step in this long process."

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