While the majority of the attention on the 2021 Budget will be on individual tax breaks, Aged Care Spending and assistance for First Home Buyers, there were a few changes of note for those in the technology sector especially the start up space.
While most of our clients work at the large listed technology companies (Microsoft, Salesforce, Amazon and Google) there are a lot of great small and start up companies in the technology industry here in Australia that need to be supported.
The changes to employee share schemes outlined in the budget can be summarised as:
– There will be no need to pay tax upon the cessation of an employee’s time at the company. This law previously meant that workers pay tax on shares they have no opportunity to sell, simply because they are changing jobs, often meaning they just sell to cover the tax debt.
– Employers who charge or lend for issuing their employees shares in an unlisted company will be able to issue each employee up to $30,000 in shares a year, up from $5000, and those that do not lend or charge will be exempt from disclosure requirements as well as licensing, anti-hawking and advertising bans.
These changes mean that start up companies can provide more remuneration in the form of shares to employees where there is not the ability to remunerate based on their market salary.
It also provides confidence to employees that they won’t have to pay tax on shares just because they leave that company.
While only modest, it hopefully is a sign that we are starting to wake up to the need to attract talent in the technology industry to this country.
For too long, the tax regime has hampered both start up and existing large companies from attracting talent to Australia.
You can understand why.
At present, if you receive Restricted Stock Units (RSUs) in a large technology company, when these shares vest or become available to you, they are taxed as income, even though you haven’t actually received cash or benefit.
Great if the share price goes up (your stock goes up), but what if it goes down.
But it especially hurts start ups who are fighting for the best talent with those companies who can afford to splash around RSUs and Share options.
These changes are a start, but lets hope the conversation can continue as we need to ensure as a country we are seen as a ‘Go To’ country in the technology industry into the future.