The Government on Tue 14.10.2014, announced that it will reform the tax treatment of employee share schemes to support start-up companies and boost entrepreneurship.
The Government said it will unwind the tax changes introduced by the previous Government in 2009. Specifically, it said it will reverse the changes made in 2009 to the taxing point for options.
The change will apply to all companies and will mean that discounted options are generally taxed when they are exercised (converted to shares), rather than when the employee receives the options.
The Government said it will also allow employee share scheme options or shares that are provided at a small discount by eligible start-up companies to not be subject to up-front taxation, so long as the shares or options are held by the employee for at least 3 years. Options under certain conditions will have taxation deferred until sale. Shares (issued at a small discount) will have that discount exempt from tax.
Criteria to define eligibility for this concessional treatment will include the company having aggregate turnover of not more than $50m, it being unlisted and being incorporated for less than 10 years.
Furthermore, the Government will extend the maximum time for tax deferral from 7 years to 15 years.
The Government said it will also update the “safe harbour” valuation tables, which are used by companies to value their options, so they reflect current market conditions.
The integrity provisions introduced in 2009 and the id=”mce_marker”,000 up-front tax concession for employees who earn less than id=”mce_marker”80,000 per year will be retained.
The Treasurer is expected to consult with industry on draft legislation and the changes are proposed to commence on 1 July 2015.
[LTN 198, 14/10/14]