Tax break for start-up companies
Start-up companies are to get a tax break from July 2015 in a bid to encourage innovation through employee share schemes.
Employee share schemes give workers a financial share of the company's potential success.
They have proven successful in helping small start-up companies attract and retain skilled staff.
But Prime Minister Tony Abbott said changes introduced by the Labor government in 2009 effectively killed off the schemes.
Under the government's proposed new laws, discounted options or shares provided by start-up companies won't be subject to up-front taxation, so long as the shares or options are held by the employee for at least three years.
Options under certain conditions will have taxation deferred until sale and shares issued at a small discount will have that discount exempt from tax.
To be eligible a company must have a turnover of not more than $50 million, be unlisted and incorporated for less than 10 years.
To give start-ups more time to succeed, the government will extend the maximum time for tax deferral from seven years to 15 years.
The government will also update the "safe harbour" valuation tables, which are used by companies to value their options.
Treasurer Joe Hockey will consult with industry before releasing draft legislation, which the government wants passed in time to start on July 1, 2015.
Australian Chamber of Commerce and Industry policy director John Osborn said the 2009 changes had a negative impact.
"To their credit the now opposition has publicly recognised the failure of those changes and will hopefully support measures to correct the problem," Mr Osborn said.
"We can no longer let the tax system starve our small business start-ups of the critical cash flow they need to grow and reach critical mass."
The government will also examine British and American models of crowd-sourcing funding for business.
Industry Minister Ian Macfarlane said there was some enthusiasm in government for the British "Patent Box" system, which gives a tax break for corporations that patent inventions and other innovations.
