Tax break revealed for startups

Have you thought about starting a new business but been put off by the number of hoops you have to jump through to get underway? The House of Representatives recently passed regulations that will change the way tax laws affect SME employees, hopefully prompting budding entrepreneurs to follow their dreams. 

According to Minister for Small Business Bruce Billson, these changes directly build on the Growing Jobs and Small Business package to make Australia a more comfortable place for these companies. 

What will the changes focus on?

Successful startups often require innovation from pioneering entrepreneurs. However, this can be risky if businesses can't sustain the confidence needed to try new ideas. The altered measures are about creating trust in the economy so Australian businesses have the conditions they need to compete on a global scale. 

"We need to be able to compete with other countries such as the UK and the USA to land new enterprise and livelihood opportunities here – and these latest changes will help us do that," explained Mr Billson.

"They will allow innovative Australian firms to attract and retain high quality employees in a globally competitive labour market."

Specifically, the changes target employee share schemes (ESS). Eligible companies will not have their discounts on ESS interest added to staff's assessable income. To be eligible for this, the company or group it belongs to cannot be listed and also must be less than 10 years old. When aggregated, the turnover for the company or group of companies cannot exceed $50 million. 

Previously, a company's options were taxed as soon as they were provided to an employee, creating added compliance procedures. This has been altered under the scheme, and should make life easier for these companies. 

"Our amendments mean that the tax on the options is paid when the option is converted to a share, so there is an actual material value on the options," concluded Mr Billson.