Major employee share scheme reforms passed into law

Denham Sadler
National Affairs Editor

Major reforms to reduce the red tape around employee share schemes have sailed through Parliament just days after they were announced and in the last sitting day before the federal election.

Further changes to employee share schemes were unveiled in the federal budget on Tuesday night, with the federal government saying they would make it easier for Australian companies to compete for talent and level the playing field for smaller firms.

The share scheme reforms were included in the Cost of Living Support and Other Measures Bill which was passed by both houses of Parliament on Wednesday. They will now come into effect from July.

The changes are focused on “reducing red tape” around the scheme, Digital Economy Minister Jane Hume said.

“It reduces the regulatory requirements that apply to employee share schemes and the associated compliance burden,” Senator Hume said in Parliament on Wednesday.

Jane Hume
Digital Economy Minister Jane Hume

“These reforms also expand access to the regime to cover a broader range of employee share schemes so that more participants can benefit. These changes make it easier for businesses to attract and reward talent to compete globally. It will also give Australians more opportunities to share in the economic value they create through their hard work.”

The amendments also remove a “perverse” incentive for local startups to shift their tax domicile overseas.

They level the playing field for non-listed local companies to offer flexible and attractive equity incentives to employees on par with listed firms or multinational companies based elsewhere.

The reforms also ensure shares and options issued by local companies are treated the same way in relation to tax, which was previously not the case.

The changes also remove the cap on the number of options and shares that can be issued, and replace the value cap of $5000 with a monetary cap of $30,000.

The government has said the reforms greatly simplify the employee share scheme, and will act as an incentive for more companies and employees to participate in these schemes.

The Tech Council of Australia welcomed the changes this week, saying the scheme is an important tool for attracting and rewarding talent.

“It’s particularly important for up-and-coming Australian companies in an environment where there are so many skills shortages and where remuneration has been going up at 15 to 20 per cent [annually],” Tech Council chief executive Kate Pounder said earlier this week.

“They basically need everything in their armoury to be competitive, and to competitively reward talent. The timing of the changes to these rules is excellent to help up-and-coming companies to offer more competitive packages to their staff.”

The government last month legislated to remove the cessation of employment as a taxing point in employee share schemes.

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