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Australian Government Coat of Arms

Budget | 2015-16

Budget 2015-16
Australian Government Coat of Arms, Budget 2015-16

Encouraging start‑ups & entrepreneurship

Today's start‑ups and entrepreneurs will help fuel investment and jobs into the future

Australia is a nation of entrepreneurs.

Our nation proudly has a larger proportion of the population starting a small business than almost any other developed country in the world. In 2013‑14, there were over 280,000 new small businesses in Australia.

This package provides a helping hand to start‑ups and will help energise enterprise across the country.

To further boost entrepreneurial endeavour, start‑ups will be allowed to immediately deduct professional expenses incurred when they start a business, such as legal expenses on establishing a company, trust or partnership; rather than writing them off over five years. This will provide immediate cash flow benefits for small business.

The Government is also making it easier to start a business by streamlining business registration processes.

A single online registration site will be developed for business registration, including company registration. This site will be simple to use. It will provide all relevant information clearly and have integrated customer support.

From 1 July 2015, expanded tax concessions for Employee Share Schemes will enable employees to share in, and benefit from, the future growth and success of the business. It will also allow business owners to invest more of the company's cash in growing the business. This $200 million investment in our future will generate rewards for our entire economy.

Removing obstacles to crowd sourced equity funding will help promote small businesses access to finance by increasing the availability of innovative sources of funding.

Australians have a strong start up culture

Proportion of adult population starting or running a new business

Australians have a strong start up culture: Proportion of adult population starting or running a new business

Streamlining business registration

Planning to start a business

Jodie is intending to start up a new 3D printing business in Tasmania.

She has taken advice from her accountant, and decided to structure her business as a company.

Now she needs to get an Australian Business Number (ABN), register her company, consider registering a business name and sort out her GST and PAYG (withholding) requirements.

With the move to Streamlined Business Registration, Jodie will be able to log onto business.gov.au and enter her contact details just once. This will take care of all these registration requirements in one single transaction.

Jodie will be issued with a secure login and an Australian Business Account to make it easy for her to interact online with a range of government agencies.

She can also check out whether there are any other Commonwealth or Tasmanian licences, or permits, she might need to get her new business up and running.

Jodie will no longer need an Australian Company Number or a Business Tax File Number for her business. Rather than having three different identification numbers to remember, she will just be able to use her ABN to interact with the Australian Taxation Office and the Australian Securities and Investments Commission.

Reducing the red tape associated with starting a small business

Under the Streamlined Business Registration model, to be implemented by mid-2016, an individual planning to start a business will be able to log onto business.gov.au and access:

  • The Australian Business Licence and Information Service (ABLIS) to identify the government licences, permits, approvals and registrations required
  • ABN registration
  • Company registration
  • Business name registration
  • GST registration
  • PAYG (withholding) registration
  • Fringe Benefits Tax registration
  • An Australian Business Account to provide an integrated business account with government
  • Online payment for registration costs.

Employee share schemes

New start-up company

Olivia has an exciting idea to develop a new app, which she believes could become very popular and be used by people all over the world.

She needs to attract the best and brightest app developers from around the world to help her make her dream a reality. However, Olivia does not have a lot of money to pay the developers.

One way that Olivia can attract developers to work for her, without having to pay them large salaries, is by offering shares or options in her company through an employee share scheme. This will allow the developers to share in future growth and success of the company, while allowing Olivia to invest more of the company's cash in growing the business.

Shares and options issued under an employee share scheme form part of an employee's remuneration so are usually subject to income tax.

Current law

Under the current law, the developers will generally have to pay income tax on any shares or options that Olivia provides to them at the time they receive those shares or options, even if they have not realised any financial benefit from them.

New law – start-up concession

Under the new law the developers will not generally be liable to pay tax up-front on those shares or options.

This makes an employee share scheme more attractive to Olivia and her new developers.

The Government is making it easier and more attractive for companies and their employees to participate in an employee share scheme

Current Law

  • The default taxing point for shares and options issued under employee share schemes is when the employee receives those shares or options.
  • For options, this often forces employees to pay income tax before they can take any action to realise a financial gain from the options, by converting them into shares and selling the shares.

New Law (from 1 July 2015)

  • The default taxing point for options will be changed so that employees will not generally have to pay income tax until they can realise a benefit from their options. This will benefit employees of all companies.
  • Eligible start-up companies will also be able to offer shares or options to their employees at a small discount and have tax deferred until sale (for options) or the small discount exempt from tax (for shares).

Making it easier for companies to access innovative sources of funding

Small company

Rebecca owns a small proprietary company and is looking for some additional funding to develop her innovative new product.

After putting funds into the start-up phase, Rebecca and her family do not have additional money to invest.

Rebecca has talked to her bank about getting a loan, but is unhappy about the conditions of the loan.

Rebecca would like to investigate the option of crowd-sourced equity funding – obtaining funding online from a range of small interested investors.

Making it easier for public companies to access innovative sources of funding

Current law

The current regulatory framework for companies makes it difficult for Rebecca to undertake crowd-sourced equity funding.

As a proprietary company Rebecca would have restrictions on the number of people she can access finance from.

One option would be to transition to a public company – but that would increase Rebecca’s red tape, with new governance and disclosure obligations.

New law

The new law will remove the costly elements of transitioning to a public company, enabling Rebecca to more easily raise funds from a large number of small investors.

The new law will balance supporting investment, reducing compliance costs for small businesses and maintaining an appropriate level of investor protection.