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Published 13 June 2013 10:48, Updated 14 June 2013 05:51
Communications Minister Stephen Conroy says goverment can’t come up with the ideas for new ventures but can provide the infrastructure and environment that allows them to thrive. Photo: Erin Jonasson
Technology entrepreneurs have welcomed a government review of employee share scheme regulations, which they claim are forcing talented staff in new businesses to leave for larger companies or overseas.
The review, announced by Communications Minister Stephen Conroy on Wednesday, is thought likely to result in further taxation reform intended to ensure start-up employees are not taxed before selling their options.
Although larger companies railed against earlier taxation changes for employment stock-option plans in 2009, those changes appear to have had the largest effect on the local start-up ecosystem.
Start-ups and venture capitalists say share options are often used in lieu of higher salaries during early development phases, with the promise of a greater return on listing to the stock market, or selling to another company.
Such plans – which are used by 11,000 companies in the United States, covering more than 10 million people – have been highlighted as a key reason big technology companies such as Google and Facebook were able to court initial talent quickly.
A survey conducted by Deloitte and Norton Rose of 104 Australian businesses earlier this year found the majority of those surveyed favoured the schemes but found them too complex to adopt.
Michael Fox, co-founder and chief executive of online retailer, Shoes of Prey, said the review was a good start. “It’s far from an ideal system, the way it’s structured at the moment,” he said. “It’s like paying tax on the winnings of the lotto ticket before you win the lotto.”
Senator Conroy said the review, one of several initiatives centred around the government’s digital economy program, was aimed at making Australia more friendly to start-ups.
“Government can’t go and build the next Twitter, Instagram or 99 Designs,” he said. “But we can provide the infrastructure and the environment to help Australians who will.”
Opposition communications spokesman Malcolm Turnbull has also indicated support for changes to the regulations.