Australian startup companies can look forward to new laws that will create a tax break in July, 2015. In order to help small companies that are trying to attract talented employees and keep them devoted to the company with a share of the potential success, employee share schemes are becoming a common practice.
This can drive innovation within a company as well as within Australia. The government has recognized this and is moving ahead with new proposed laws that will give tax breaks on employee share schemes.
Employee Share Schemes
Shares of the startup can be given or discounted options can be provided to an employee, with the knowledge that the employee will do his or her best to increase the value of the company and therefore increase the value of their shares. This has worked for startups before and with the help of this bill, small businesses will be provided with the tools and capital they need to grow.
Defining a Startup’s Tax Breaks
A startup, as defined by the bill, must not have a turnover of more than $50 million; must have been incorporated in less than 10 years; and must be unlisted. The tax deferral period for startups will be extended from 7 to 15 years, and the government will also update the “safe harbor” valuation tables that companies use to value those options.
Small companies will be able to draw in skilled workers and keep them vested in the company, ensuring their devotion to the success of the company. With so little capital and so few workers, these tax breaks will help many startups get to the critical mass stage where they can trade on a global scale.
Looking forward
The current government is focusing on growth and finding creative ways to help small businesses expand. The stifling regulations of the past are finally being corrected and the damage is being repaired by tax breaks for those businesses that need it most. Crowd sourcing and other strategic forms of capital investment are important in today’s fast paced global market.
Allowing small businesses every opportunity to find talent and capital will help keep Australia at the forefront of innovation and a leader in the global market place.
