On 12 June 2013, the Government released Advancing Australia as a Digital Economy: Update to the National Digital Economy Strategy and announced a review of the regulatory environment for innovative information, communication and technology start-up companies (ICT companies). This is in line with the Government's aim for Australia to be a leader in the digital economy by working with the latest digital and technical innovation, coinciding with the release of Australia's first National Cloud Computing Strategy.
By December 2013, the Government will consult with stakeholders to identify the most effective measures for addressing the barriers faced by entrepreneurs in establishing new companies.
As part of this process, the Government will review the tax treatment of employee share schemes, with the aim of reducing the cost and complexities involved in the establishment of these schemes. Under current arrangements, income tax is payable at the time shares or options are received; however the shares or options of a start-up company may hold no value, or may never be exercised given the high risk nature of start-up companies. Therefore, the review will consider:
- developing guidance to reduce the administrative burden of establishing an employee share scheme (including the time and cost of valuing shares or options);
- adjusting the valuation methodology of options; and
- examining when share options should be taxed for start-up companies.
Looking beyond 2013, the Government plans to review the regulations that govern crowd-sourced equity funding (CSEF), a relatively new method of raising funds for early stage start-up companies that has become popular in the USA, UK and Canada. The review with stakeholders will cover:
- whether the current Australian corporations law enables appropriate CSEF;
- whether international models can provide guidance; and
- developing a best practice framework.
Such efforts will support the Government's bid for Australia to become a leading digital economy, while addressing the issues of under-capitalisation and talent retention in the local start-up market.
Download a PDF version of this article: Employee Share Scheme Announcement
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