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Improvements to the taxation of employee share schemes

14 January 2015 | Draft Legislation

The attached exposure draft legislation would amend the income tax law to implement the Government’s commitment to improve the tax treatment of employee share schemes as part of the Industry Innovation and Competitiveness Agenda. Accompanying this draft is explanatory material to explain the operation of the proposed law.

The proposed amendments would:

  • reverse some of the changes made in 2009 to the point at which rights issued as part of an employee share scheme are taxed for employees of all corporate tax entities;
  • introduce a further tax concession for employees of certain small start-up companies; and
  • allow the Australian Taxation Office to work with industry to develop safe harbour valuation methods, supported by standardised documentation, that will streamline the process of establishing and maintaining an employee share scheme for businesses.

These changes would improve the tax treatment of employee shares schemes, making them more accessible and attractive to business in order to facilitate the alignment of interests between employers and their employees, and stimulate the growth of innovative start-ups in Australia by helping small unlisted companies be more competitive in the labour market.

The Australian Taxation Office has commenced consultation with stakeholders to identify appropriate safe harbour methodologies and develop standardised documentation. Details of this consultation are available on the Australian Taxation Office website.

Key Documents

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