Malcolm Turnbull (Wentworth, Liberal Party, Minister for Communications) Share this | Hansard source

The Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 addresses one of the most damaging acts of the previous Labor government. It did not involve the wasting of tens of billions of dollars like the NBN project did, but what it did do was potentially cost Australia billions of dollars. We will never know what it did cost, but, by changing the law on employee share schemes and options schemes in 2009, what the Labor government did was to stifle innovation and disincentivise start-up companies.

The reality is that nobody knows when a new idea or a new company will be successful or not. Everyone thinks they do; they think that their new project is going to make them rich but, regrettably, most projects do not succeed, even more are pretty mediocre and only a handful do really well. But it is that eternal optimism and entrepreneurship and that spirit of adventure and innovation that drives our economy. All of the laws that we pass here and all of the great speeches we give are fine, but what really makes Australia great, and what provides the jobs and the security for Australians in the future, is the energy and enterprise of thousands of Australians. I think all of us, whatever our politics, know in our hearts that that is right.

Some people in this place think that the government can tell business how to be innovative and can provide business tips. Oddly enough, the side that thinks that is the Labor Party, which is least qualified to do so. But on our side we believe that government's role is not to tell citizens, let alone businesses, what is best, but rather to enable them to do their best. One of the important things we should do is to make sure that we remove as many obstacles to enterprise and entrepreneurship as we can; in other words, to clear the way for that spirit of enterprise to take off. That is one of the reasons the Abbott government has been so assiduous in cutting regulation and red tape wherever we can, and we will continue to do that. I hope that the governments that follow us in the years and the decades to come will do the same, because there has always been a tendency for governments to create new regulation as new issues arise, but to fail to prune away the regulation that is no longer needed or is no longer fit for purpose.

In any new enterprise, and indeed in existing enterprises, it is absolutely critical to incentivise the staff, the team; and the best way to do that is to give them a sense of co-ownership. Again, who would argue with that? One of the ways that that is done in a modern economy is to provide employees with shares or, very often, with options to acquire shares in the future. The hope is that that gives them a feeling that they have got some skin in the game and that they are not just working for wages or some cash remuneration. That is absolutely critical, particularly with start-up companies, because the reality is that, with a start-up, generally funds are scarce; what little money is available is generally going into the acquisition of necessary resources and equipment and so forth. The people are generally working for below market remuneration, and their upside is expected to come if the project is a big hit. Of course, as we know, often it is not, but sometimes it is. So hope springs eternal, and hence the ability to incentivise your team is absolutely critical.

It is practically beyond belief that something as important as this to the economy of enterprise and innovation and entrepreneurship would have been attacked by the Labor Party in 2009. The effect of the changes that were made to employee share and option schemes was that employees became liable to taxation upon being granted options and being granted rights to shares even though they had no means of realising the value of what they were being given. You would have to be very confident to go off to the bank and borrow money, take out another mortgage on your house or pay tax on some options you had been given in a start-up company. Yes, it might be the next Facebook—there is always the possibility of that—but more likely than not it is not going to be anything of the kind.

This was a change that was absolutely calculated to kill employee share and option schemes dead. If that was the intent, it worked. It was as though the previous government had asked themselves, 'What is the stake that we can drive into the heart of Australian innovation?' They found out, and it worked perfectly. Big companies could spend a lot of money on lawyers and accountants to structure things and get around the rules—there were not many that did that although I know a few did—but the start-up sector basically stopped giving their employees shares and options as incentives. That obviously reduced their ability to attract talented people and, as I think all honourable members who have taken an interest in this matter know—I acknowledge the member for Chifley sitting opposite me at the table, who on the Labor side has taken a keen interest in innovation—this became a huge issue with the start-up sector. Whenever you spoke to people in the start-up sector, particularly in the technology area, this was the one big complaint they had.

Yesterday in a matter of public importance discussion the member for Blaxland, the shadow minister for communications, referred to an Australian entrepreneur in Silicon Valley, Tan Le, and how he had been inspired by her—so he should have been; she has a really inspiring story. During my visits to Silicon Valley in recent years, and I think everyone has shared the same experience, the big complaint from Australian companies over there has been this extraordinary tax treatment of employee shares and options that the Labor Party imposed. By the way, that is entirely at odds with global practice. Everywhere else in the world, one way or another tax is paid—often at a concessional rate, but it is paid—when the employee either realises the share or the option or is able to realise it; in other words, when a share becomes liquid and tradeable. That makes perfect sense because then the employee can realise the security that he or she has been given and pay the tax. This was the biggest single concern that people had. Even though it was attacked by the technology sector, the start-up sector, from the time the changes were made in 2009—and that criticism became more and more intense—it is remarkable and tells you how deaf the Labor Party has been to the spirit of enterprise and the spirit of innovation so critical to our economic future that they made no efforts to change the law. They could simply have turned around and said, 'Whoops, we have made a mistake, let's reverse it,' but they did not.

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