Consultation on the Treasury’s draft legislation for further reforms of Australia’s Employee Share Scheme (ESS) has opened, and AusBiotech is seeking feedback from members that may be impacted.
The reforms have been welcomed by AusBiotech as they will make it easier for companies – particularly biotech start-ups and SMEs – to offer an improved ESS to their employees. It will cut red tape and remove the ‘cessation of employment’ taxing point, as well as other reforms. ESS enables companies to complement cash remuneration and make salary packaging appear more substantive and attractive.
This is an important opportunity for Australia to attract the best and brightest employees within an industry that works in a global community and where competition is fierce; it is an area that AusBiotech has advocated in for more than eight years.
While the changes to the ESS were first announced in 2018, the legislation was never moved and therefore the reform was never implemented. The 2020-2021 Federal Budget demonstrated further commitment through its forward estimates, and consultation has now opened.
AusBiotech welcomed the Budget announcement, given the advantages of ESSs is amplified in the life science sector, where the pre-revenue phase is typically extended by the need to clear regulatory hurdles before revenue can be earned, which can exceed a decade. To support the growth of Australian innovation, it is essential to encourage start-ups and implement beneficial taxation provisions.
Treasury noted that “Currently, employees are taxed on their shares issued under an ESS as soon as they leave the company, often forcing them to sell them to meet the tax liability. Once the reforms are implemented, employees will instead be taxed at the earlier of the remaining deferred taxation points.”
As the national voice of the life sciences industry, AusBiotech champions advocacy and regularly submits commentary on behalf of its members and the Australian life science industry. It has made numerous submissions and representations on ESS since 2009.