On February 6, 2020, the Standing Committee of the Australian House of Representatives announced an inquiry in relation to the tax treatment of employee share schemes (ESS).  The inquiry will focus on the effectiveness of the changes made to the ESS rules in 2015 (particularly the introduction of the start-up concession which provides favorable tax treatment for start-up companies under certain circumstances, and the alteration of the taxation point for options from vesting to, generally, exercise).
Specifically, the Committee will examine:

  • how effective the changes in 2015 have been in their goal of bolstering entrepreneurship in Australia and supporting start-up companies
  • the costs and benefits of these concessional taxation treatments, and deferred taxing points for options, to the broader community
    whether the current tax treatment of ESS remains relevant to start-up companies and whether any changes are appropriate to ensure the taxation treatment remains relevant
  • how companies currently structure their ESS arrangements and how taxation treatment affects these decisions
  • the challenges faced by companies in setting up an ESS arrangement and how the standard documents by the Australian Taxation Office, and introduced in 2015, assist this process and whether additional improvements should be made

Comments in response to the inquiry should be made by March 19, 2020.  If you would like to provide any comments or need more information, please contact your Baker McKenzie attorney. Further information about the inquiry can be found here.

We would like thank our colleague Erica Kidston in our Sydney office for her assistance with this alert.

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