That is why addressing these challenges are an important part of the Abbott government’s focus on small business.
We are committed to getting road blocks, obstacles and unnecessary head winds out of the road of small business, family and farming enterprise.
We want more small and medium businesses to be able to start, and others to be able to get on with innovating and growing.
There are two major measures we have been working on to this end; making employee share schemes more attractive and feasible, and introducing a crowd source equity funding model to provide businesses with a unique way of raising capital.
An employee share scheme (ESS) allows employees to acquire securities (shares or rights) in the company they work for.
Following extensive consultation with industry, we implemented improvements to ESS in June this year.
They undo the harm caused by the Rudd/Gillard Rudd government. Under Labor’s changes in 2009, the taxing point for options was brought forward to when the options were issued, not when the recipient had any economic advantage or material gain.
This made ESS unattractive for employees and therefore less viable for employers.
Our changes mean the tax on the options is paid when the option is converted to a share, so there is an actual material value on the options.
In addition, we have introduced an extra incentive that allows a further deferral of the taxing point where eligible start-up companies issue shares or options to their employees at a small discount.
I know that red tape and red ink are significant barriers for small business owners to grow their business, and to employ staff – that is why we are so committed to reducing the red tape burden for small business.
The government considers how we can do this with every piece of policy we introduce or improve, and it is working, as we have already slashed $2.5 billion in compliance costs.
In the case of ESS, we have simplified the process of establishing and maintaining employee share schemes. Start-up companies can now use standard templates created by the Australian Taxation Office (ATO) to offer employees options in their company. These templates include an employee option plan and an employee letter of offer.
A safe harbour market valuation methodology has also been developed to give certainty to start-ups that are valuing in their company in order to implement an ESS.
The methodology means the ATO now provides simplified and approved market valuation methods for businesses to use - and if you use one of them, you have the certainty that the ATO will accept the valuation.
Bruce Bilson is the federal minister for small business and the federal member of Dunkley.