Reform of Australia’s employee share scheme laws could potentially boost the economy by $1.4 billion in the long run, according to a report by Employee Ownership Australia and New Zealand (EOA).
The EOA chair and Link Market Services global head of EPS, Angela Perry, says the Employee Share Schemes – Their Importance to the Economy report presents a strong case for a reversal of the 2009 Employee Share Scheme laws.
Currently employees are taxed when they receive share options from their company, rather than when they are sold or become full shares.
The report’s key findings are as follows:
- The amount of money subject to income tax under the employee share plans has halved since the 2009 changes.
- Reversal of those changes could increase tax revenue by over $215 million per year.
- If option plan taxing returns to the pre 2009 position then there is potential to increase plan usage by over 200% and increase annual taxable income by over $131 million.
- With reform, salary sacrifice plans are likely to increase immediately by 10%, impacting 40,000 employees and increasing the amount of savings per employee to $5000.
The findings add to an already considerable pile of evidence of the benefits of reform, supporting what could now be considered a near universal view of those in the startup industry.
“We weren’t surprised by the findings, but we felt it was important to get the facts and figures out there,” Perry says.
“While most people in the startup industry would anecdotally agree with the evidence, with thought it was necessary to provide evidence in support, with distinct and reliable information.”
The study examined anonymous client data from Australia’s two key share plan administrators, who together combine for between roughly 80% and 90% of the market.
Among those who have spoken out in favour of employee share option scheme reform are Australian Private Equity and Venture Capital Association chief executive Yasser El-Ansary, RetailMeNot founder Guy King, Blue Chilli’s Alan Jones, Shoes of Prey co-founder Michael Fox, Starfish Ventures’ John Dyson, Deloitte, the Institute of Public Accountants, and federal Minister for Communications Malcolm Turnbull.
However, even with the support of a prominent cabinet minister the government has been slow to act on the issue.
A review into employee share scheme laws, which was started under the former Labor government late last year, was due to report to the Department of Treasury in December.
However, it appears to have stalled during the change of government, before consultation was reopened by the Coalition government in January.
That consultation period closed on February 7 and in late May the department said issues raised regarding share option scheme laws were now being considered as part of the Prime Minister’s Taskforce which was established to develop a National Industry Investment and Competitiveness Agenda, which was due to make its recommendations to government by “mid 2014”.
StartupSmart asked the government when it expects to release its findings from the review and had not received a response at time of publication.
Perry was optimistic reform would eventually occur.
“We will be sending this to our contacts within the government,” she says.
“(Liberal MP) Tony Smith has always been a supporter, and we’ll be putting forward a case based on reversing those 2009 changes.”