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‘Critical’: Push for workers to own bigger slice of companies stalls

Under the current scheme, unlisted Australian businesses with up to $50 million turnover can offer shares worth up to $5,000 per year to employees, provided they meet a strict set of regulatory criteria including disclosure documents. The regulation is designed to balance the risks to employees from having shares as part of their pay packets, though smaller operators say the policy is too difficult to access.

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Assistant treasurer Michael Sukkar said the government was “currently considering stakeholder feedback” on the reforms after a treasury consultation in April.

“The proposed changes build on improvements the government has already made to make employee share schemes more attractive, including improving the taxation treatment of employee share schemes and limiting the requirement for disclosure documents,” Mr Sukkar said.

The startup community has long argued this is too restrictive when compared to other markets and that the reforms should go further than what has been proposed. In the US there are few limits placed on the amount of equity that startups can offer their workers.

Director of Entrepreneurship at UTS, Murray Hurps, said he had seen countless Australian startups spend thousands of dollars trying to negotiate the current complicated scheme.

“The ability to give equity to people in a company is critical for tech startups, because these companies are able to become large companies quickly and the normal paycheck isn’t the real value that you can give to employees,” he said.

Industry association Aus Biotech said the current policy was too restrictive for life sciences companies because businesses needed to be less than 10 years old to offer shares, and many biotech businesses took longer than this to develop.

There’s no question that our employee share ownership plan regime currently acts as a handbrake.

AIC chief Yasser El-Ansary

“AusBiotech supports a more sympathetic treatment of start-up companies, to support the growth of the Australian innovation sector,” Aus Biotech chief executive Lorraine Chiroiu said.

In May Treasury asked for feedback on reforms to the policy, including making it easier for small businesses to offer their staff shares without having to publicly disclose sensitive financial information about the company.

Yasser El-Ansary said the government should have a strong appetite for reform.

Yasser El-Ansary said the government should have a strong appetite for reform. Credit:Glen McCurtayne

Mr El-Ansary said the government should have a strong appetite for reforming the space because there is a “pretty compelling case” that employee share schemes attract talent and incentivise workers to stay at local startups.

The Australian Investment Council has argued the value of shares offered should increase from $5,000 a year to as much as $20,000 a year to account for the ability of global tech businesses to offer their staff a much bigger slice of a business as part of their salary package.

A 2017 paper on the topic from the Department of Innovation and Science found less than one per cent of private companies offer their staff shares.

However, companies that did use the scheme had “lower employee churn, higher sales, higher value added, higher labour productivity and higher value added growth,” the report said.

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