Launch your startup business into the growth phase

[ Tax Breaks on Employee Share Ownership for Start-up Companies ]
by Michael Garrone Published

As part of the Industry Innovation and Competitiveness Agenda the federal government announced yesterday a number of measures to assist businesses.

There are a number of positive take aways where it comes to start ups and growing businesses along with some guidance around the sectors being targeted in the future.For a break down of the key measures affecting small to medium businesses:

Employee Share Ownership

  • For the most part these changes take us back to the old rules that were around before 2009.These allowed employee’s to defer tax on issue of options or shares until a trigger point in the future.The changes that forced taxation on most employees up-front will no longer apply to many companies.
  • Companies with a turnover of less than $50 million can provide options or shares at a discount that won’t be subject to up-front tax where held for 3 or more years.
  • These companies will need to be less than 10 years old.
  • Employees will be able to defer tax bills from 7 to 15 years unless an earlier taxing point occurs, eg, sale of the options or shares.
  • These measures are intended to commence on 1 July 2015.

These are positive steps in the small to medium enterprise sector for growing businesses.Inevitably engagement and incentivisation of key staff members becomes an issue.In some cases the only way to attract, retain and encourage key staff is to allow them to share in the success of the business.

With today’s announcement it is easy to forget that the old measures also had a number of issues that discourage start-ups and growing businesses from implementing plans.For example, costs of set-up and maintaining plans.Cashflow problems can also occur where staff are taxed on shares or options without the ability to dispose of them. Hopefully some of the issues that were a problem before 2009 will get an airing.

Other announcements

  • Industry Growth Centres will be targeted to five key sectors:
    • Food and agribusiness
    • Mining equipment, technology and services
    • Oil, gas and energy resources
    • Advanced manufacturing centres
    • Medical technologies and pharmaceuticals
  • Visa’s – changes were also announced around the use of skilled 457 Visa’s to ensure key sectors are able to employee staff that are critical to growing their business.There has also been a focus in reducing the well known rorts that have been reported in the media over recent years.
  • Apprenticeships – establish a new network from 1 July 2015 to lift apprenticeship rates completion rates

The above announcements around Employee share ownership are a good starting point for entrepreneurship and start-ups in Australia.After notable calls by key members of the technology industry in Australia such as Atlassian it is good to see the government listening.

For more information on employee incentivisation and share ownership please contact Michael Garrone or your regular contact at businessDEPOT

For a full copy of the report, or to see the government response, check out the links below:

Media release from The Hon. Bruce Billson: Encouraging employee share ownership and entrepreneurship

Industry Innovation and Competitiveness Agenda

Media Release from the Prime Minister: Encouraging employee share ownership

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