CEOs' views sought on consultations: share schemes and equity crowd funding

Among the proposals included in the October release of the federal government’s Industry Innovation and Competitiveness Agenda (IICA) was a consultation on a potential regulatory framework for crowd-sourced equity funding (CSEF) in Australia and the tax treatment of employee share schemes (ESS), to be repaired after the 2009 changes saw companies flee the program.

Both consultations are now open for comment and views are sought from biotechnology industry leaders to contribute to the AusBiotech submissions on behalf of the industry. Both consultations close on 6 February.

Crowd-sourced equity funding

The federal government, in launching the review, said: “CSEF is an emerging form of funding that allows entrepreneurs to raise funds online from a large number of small investors. Along with other innovative finance options, including peer-to-peer lending, angel investing and venture capital, CSEF has the potential to increase small businesses and start-ups’ access to funds to develop and implement their ideas and products.”

However, it is understood that current regulatory requirements present a barrier to the widespread use of CSEF in Australia.

The CSEF discussion paper seeks stakeholder feedback on characteristics of potential CSEF models, including a model put forward by the Corporations and Markets Advisory Committee in a report released in June 2014, as well as a model similar to that recently implemented in New Zealand.

The government says it has not made a decision on its preferred CSEF framework and is not limiting itself to implementing either of the models in the discussion paper. The consultation process is intended to ensure that the government strikes the right balance between supporting investment, reducing compliance costs and maintaining an appropriate level of investor protection.

The discussion paper and more information can be found here.

Employee share schemes

The importance of ESSs is especially poignant and amplified in the biotechnology sector, and AusBiotech has made numerous representations and submissions to government in this regard since the 2009 changes. When the IICA announcement was made, AusBiotech welcomed the government’s proposal to improve the tax treatment of employee share schemes from 1 July 2015, with particular benefits for start-ups.

The government said it will reverse for all companies the changes made in 2009 to the taxing point for options, while retaining the integrity provisions that were introduced at that time. The existing upfront tax concession will also be retained.

Employees who are issued with options under deferred tax schemes will generally be able to defer tax until they exercise the options, rather than having to pay tax when they receive the options and the maximum tax deferral time will be extended to 15 years. The government said it will also update the safe harbour valuation tables and make a further concession for eligible start-ups, which will allow them to issue to their employees options under certain conditions or shares at a small discount, and have taxation deferred until sale or the small discount exempt from tax.

The exposure draft and explanatory materials regarding the ESS were published for consultation last week and submissions are invited. The explanatory materials, draft legislation and more information can be found here.

AusBiotech will be making a submission to both consultations and invites your feedback and contributions by 1 February 2015. Contact AusBiotech Communications Manager Lorraine Chiroiu by calling +61 (0)3 9828 1414 or +61 (0)429 801 118 (mobile) or emailing lchiroiu@ausbiotech.org