A federal parliamentary report has called for employee share schemes to be made more tax effective to help support business innovation.
A key recommendation of the report, Owning a Share of Your Work, is that shares issued through employee share schemes should be treated as capital not income with capital gains tax being levied on their disposal.
The report was presented to federal parliament on 23 August by the House of Representatives Standing Committee on Tax and Revenue.
The committee recommends that cessation of employment should not be the taxation point for employee share scheme shares. But this might not appeal to founders of start-ups as it could result in ex-employees holding onto shares after they leave the company and possibly having access to company information.
The committee has made a total of 18 recommendations to support the uptake and continued use of employee share schemes in Australia.
Other recommendations include regulatory relief to reduce disclosure requirements in certain situations, enhanced collection and sharing of data relating to employee share schemes, a public awareness program and an investigation by the Productivity Commission to identify how existing arrangements in this space can be improved.
Amendments to the Tax and Superannuation Laws Amendment Employee Share Schemes Act 2015 and the Income Tax Assessment Act 1997 are proposed to simplify current complicated and restrictive tax treatment of employee share schemes and to support more individuals gaining access to tax concessions through employee share schemes.
Presenting the report, committee chair, Liberal member for Mackellar, NSW, Jason Falinski, advocated policy changes.
“Employee share schemes matter because they support new businesses, innovation and start-ups, which are the engine of higher productivity in our country,” he said. “Higher productivity leads to sustainably higher wages, better products and services, greater competition and more choice. All these outcomes directly impact on the quality of life that hard-working Australians enjoy. Productivity is what makes life better, more affordable and easier.”