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Not all start-ups will benefit under the proposed new taxation of employee share schemes rules

Publication date: 09 Feb 15 | Source: WEEKLY TAX BULLETIN

Issue: Issue 3, 23 Jan 2015


The proposed amendments to the taxation of Employee Share Schemes (ESS) announced in October 2014 and released in Exposure Draft legislation on 14 January 2015 contain generous concessions, particularly for companies that satisfy the conditions of a start-up under the new rules. This can be seen as a welcome move after years of suggesting that incentivising talent in a tax effective manner has been a factor in Australian start-ups relocating to Silicon Valley (alongside the other key reason, being access to venture capital funding).

An existing concession aimed at incubation of Australian start-ups is the venture capital limited partnership (VCLP) regime, and the early stage venture capital limited partnership (ESVCLP) regime, which provides material tax concessions to investors willing to advance funds to start-ups in certain specified industries. It would appear ironic therefore, that start-ups who have been in receipt of sponsorship funds from venture capital investors may find they are ineligible to meet the requirements of these new concessions, as described in this article.

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Author profiles

Andrew Sharp
Andrew Sharp is an EY Tax Partner who helps domestic managers raise funds, and helps both offshore and domestic fund managers invest them. - Current at 10 June 2019
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Peter Feros CTA
Peter Feros is a tax partner at Clayton Utz. Peter specialises in providing transaction structuring advice and has acted for, among others, many large corporate and financial sponsors. His areas of focus include property, infrastructure, private equity and venture capital investment - Current at 18 July 2017
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Mack WAN