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

The honourable member opposite me says they did. That is remarkable. If the bad law in 2009 was repealed, I wonder why we are going to the trouble of debating this bill today. The Labor Party did nothing about it. They made no change to the law; they wrung their hands but we are here actually getting the changes made.

This is a very important reform, starting from 1 July, in the new financial year, that will bring the Australian regime on employee shares and options into line with global practice. It will basically ensure that there will be no up-front taxation of employee shares and options. It will increase the deferral period—the taxing point—from seven years to 15 years. There will be no taxation on the grant of an option. Taxation will occur when the employee exercises the option, and after exercising the option there is no real risk of forfeiting the underlying share and restrictions on the sale of the share have been lifted. There are special tax concessions to employees on the grant of shares and options in smaller start-up companies, and that is very important too. It shows the concern the government has. I know honourable members are familiar with these points, but eligible start-ups that have an aggregate turnover of less than $50 million, are unlisted and have been incorporated for less than 10 years will be allowed to issue shares to employees at a small discount, up to 15 per cent, and issue options on very advantageous conditions. Options that have been allocated at a discount will not be subject to up-front taxation, as I noted, as long as they are held by the employee for at least three years. That means, therefore, that employees will only have to pay tax when they actually have some value that they can realise, when they can get some cash in their pocket to pay it. These start-ups will benefit by having gains on options taxed as a capital gain and not as income and therefore taxed at the lower concessional rate.

I know, as the Minister for Small Business noted in his second reading speech, that there have been some concerns, or complaints if you like, from the industry that these changes could and should go further. There is concern that taxation is payable, or a taxing point is realised, when an employee leaves his employment. There is of course, as the minister said in the second reading speech, the right to have any tax paid refunded if it turns out that there was in fact no gain realised on the shares at the time they are actually granted and become liquid. These are fair comments, and I hope that the government, over time, will be able to further improve and refine this legislation. The important thing is that our approach to the innovation sector is one of enablement. We are making these very important changes in the bill—and we appreciate the support of honourable members for that—but we will continue to seek to improve legislation and regulation that affects start-ups and innovation generally so that, all the time, we can be proactively improving the environment for Australian innovation, upon which our future prosperity depends. In other words, none of this should be regarded as set and forget.

This is a really important first step. It is going to make a very big change to the start-up sector. It will result in thousands of additional jobs being created and millions of dollars—perhaps billions of dollars—of additional value being created in Australia. We will never know the exact numbers, but the bottom line is that anything that can enable innovation in Australia has got to be good for our economy and, indeed, for all Australians—and that is what this bill does. Together with the minister and my colleagues, I commend this bill to the House.

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