The rules were initially introduced by Labor in 2009 in an attempt to stop executives from reducing their tax by pumping income into share options, The Australian Financial Review
reported. However, doing so backfired for tech start-ups, who often use share options to attract talent when high salaries are not possible.
This has resulted in start-ups losing talent to larger tech companies such as Google, and ultimately resulting in the outsourcing of many of their functions.
With submissions to the Treasury review into employee share schemes closing on Friday, tech entrepreneurs are pushing for the end of the upfront tax, BRW
“The timing of the tax really needs to be sorted,” Bosco Tan, co-founder of Pocketbook, said. “I’ve gone and raised the money and now have to give chunk of it to the government. It doesn’t give me a chance to invest in things that create value, and on our books is a large chunk of debt that the employee owes to the business.”
Last month, the Abbott government resumed Labor’s inquiry into taxation rules that tax individuals who receive share options from their employer when they receive them, as opposed to when they are sold or become full shares.