Startup-land finds a sympathetic ear in Canberra Startup-land's liking for gifts of scrip as a way to keep wages and burn rate low has found sympathy within Australia's Treasury, which has opened a public consultation on the topic of employee share schemes. Reform of the system was promised by Australia's previous government, as we reported last year, but the ball seems to …
sounds like another way the gold rush/get rich quick/rip off mug punters mentality among the managerial (lack of) class will try to avoid taxes, decent wages and other impediments to unearned riches. Performance pay and CEO bonuses here are, as elsewhere, subsidies to those who do need it. Otherwise if the rules were altered to allow those who did the work there might be something in it. A few firms would offer more benefits to staff if the fringe benefits tax made it less costly.
As it was explained to me, the problem is capital gains tax and the rules about when a capital gains event is considered "realised".
So, if you hand out shares in your startup to founders / employees, initially they're worth basically nothing. All good. If you then get some investment (angel, venture, indulgent uncle) the nominal value of those shares goes up. Sadly, in the ATO's eyes, you're then liable for capital gains tax. Which you have to pay, even though you haven't sold the shares, and there's still a very good chance that their value will go to zero before you get a chance to sell them.
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