New share scheme laws could kill options schemes for small companies

Experts say the Federal Government’s proposed changes to employee share schemes will still negatively affect technology and other start-up companies that rely on the use of options as part of remuneration packages, despite the Government’s changes to the new share scheme rules.

While the legislation has not yet passed through Parliament, the looming threat of increased tax bills for staff that are granted options are forcing a number of small companies to abandon their share programs.

Under the current scheme, options are taxed as soon as they have been exchanged at a certain value. But the new changes dictate that options will be taxed at their full value as soon as they can no longer be given up, even if no actual sale has taken place and their value then falls.