AIIA calls on Federal Government to change 'inequitable' ESOP laws

AIIA calls on Federal Government to change 'inequitable' ESOP laws

Current legislation 'penalising' local talent and forcing startups offshore

The Australian Information Industry Association has called on the Federal Government to urgently change legislation which is forcing local tech start-ups offshore.

The Association is urging the government to amend current Employee Share Option Plan (ESOP) arrangements for businesses, irrespective of size and age, commencing with start-ups and SMEs in order to fast-track the growth of the local digital economy.

The call comes as the Government proceeds with consultations regarding the existing ESOP arrangements and follows a Deloitte submission to Treasurer Joe Hockey, which suggests a government review of the legislation.

AIIA chief executive Suzanne Campbell said Australia would not become a hotbed for innovation if we continued to penalising talent and hampering the success of our startups and entrepreneurs

“AIIA believes that the existing arrangements are inequitable for all companies, irrespective of size,” she said.

“The current policy creates a barrier for emerging, innovative businesses to remain in this country and be successful.

“We advocate that the Government commit to a staged reform process, repealing current legislation and reverting back to a pre-2009 Employee Share Scheme (ESS) arrangement.

Campbell said the government needed to act swiftly to ensure Australia was strongly positioned to compete in a new global economy, at a time when traditional industry was exiting the Australian market.

“The Government acknowledged in its pre-election Digital Economy Strategy that innovation is central to making Australia more productive and more competitive,” she said.

“Employee Share Option Plans (ESOPs) make it possible for Australian startups and small businesses to attract and retain outstanding talent.

Deloitte proposes a four-point solution which entails: a clear definition of ‘startup’; more contextual tax rules; a simplified valuation methodology for ESOP tax purposes; and standardised documentation accessible on the Australian Tax Office (ATO) web site.

In its submission, Deloitte advocates the definition of start-ups as “an Australian-based business with consolidated revenue of $15 million per annum or less, and providing (new) products or services for no more than ten years in Australia.”

Campbell applauded Deloitte for its unequivocal call for change in raising the issue.

“We also welcome the submissions made by organisations such as StartupAUS, WiseTech Global and a number of AIIA members to the Government, as we strive to ensure Australia retains smart people and smart ideas to future proof our economy,” she said.

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Tags DeloitteTreasurer Joe HockeyAustralian Tax Office (ATO)Employee Share Option Plan (ESOP)The Australian Information Industry AssociationAIIA chief executive Suzanne Campbell


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