A more skilled labour force...45 Ambition 3: Better economic infrastructure...61 Ambition 4: Industry policy that fosters innovation and entrepreneurship...
This is just the start†because job creation, growth and competitiveness need constant attention The guiding principle of the Government†s Industry Innovation and Competitiveness Agenda is
The Agenda has drawn on the insights of my Business Advisory Council and other experts The Agenda sets out four ambitions that Australia must pursue
2. a more skilled labour force 3. better economic infrastructure; and 4. industry policy that fosters innovation and entrepreneurship
Employment growth has been weak and the jobs created have tended to be funded in sectors directly or
businesses and workers equipped with the skills and incentives to adapt to changing economic conditions and able to seize new opportunities
Entrepreneurship and a flourishing start-up community promote job creation and productivity growth. These types of businesses benefit the broader economy by testing new ideas, developing
investment and hard work is important to foster innovation in Australia Likewise, much will be required of our workforce,
the financial system, competition policy, workplace relations, energy, agriculture and the development of northern Australia, among other issues, to provide roadmaps for further
•a more skilled labour force •better economic infrastructure; and •industry policy that fosters innovation and entrepreneurship
competition, employment and participation. As G20 president, Australia will show leadership in pursuing a new wave of economic reform
•Encourage employee share ownership (Proposal 15, page 76 •Establish Industry Growth Centres (Proposal 13, page 72
•returning our workplace relations system to the sensible centre; and •helping parents stay in the workforce
2 LABOUR FORCE 3 Infrastructure To meet our country†s economic infrastructure needs for the 21st century
will consider methods of access for employers who favour one set of arrangements yet would prefer to pay premiums rather than self-insure.
•The Government will improve the tax treatment of Employee Share Schemes (more detail under Ambition 4
â€'improving incentives to work, including through the interaction of the tax and transfer systems;
A more skilled LABOUR FORCE The Government is committed to increasing the skills of our workforce to better prepare for the
•returning our workplace relations system to the sensible centre; and •helping parents stay in the workforce
•refocused the delivery of apprenticeship support services on improving participation and completion rates, with funding of $200 million per year
Industry Skills Fund to assist in the training and employment of young people in regional
Australia and areas of identified higher levels of youth unemployment or disengagement TPO00007 An action plan for a stronger Australia
a possible refocusing of VET in schools and school-based apprenticeships •The Government will reduce red tape in the higher education sector by simplifying and
while maintaining protections to ensure that businesses do not bring in foreign workers where Australians are able to do the job
•Increased employer-sponsored visas to meet skill gaps where required skills are not available locally
improving programme integrity, to ensure that sponsored workers on 457 visas are a supplement to,
Returning the workplace relations system to the sensible centre The workplace relations system has an important role in ensuring workers†rights, pay and
conditions are fair and appropriate. At the same time, businesses need the flexibility to adapt and seize new opportunities
and workers must be free to negotiate working arrangements that suit their personal ambitions and circumstances.
our workplace relations system to the sensible centre Actions already taken •Introduced the Building and Construction industry (Improving Productivity) Bill 2013 to
•Introduced the Fair Work (Registered Organisations) Amendment Bill 2014 to establish a Registered Organisations Commission to better align the responsibilities of, and penalties
•Introduced the Fair Work Amendment Bill 2014 to: apply good faith bargaining rules to negotiations for,
ensure that the scope for workers and employees to negotiate individual flexibility arrangements is limited not unduly;
reform rules governing union right of entry; and implement a number of recommendations from the 2012 Fair Work Review
Actions to come •The Government will further amend the Fair Work laws to ensure protected industrial
action cannot be taken unless genuine and meaningful negotiations have occurred, and require productivity improvements to be discussed in enterprise agreement negotiations
•The Government will task the Productivity Commission to review Australia†s workplace relations framework, including the Fair Work laws.
Any recommendations accepted by the Government will be taken to the next election TPO00007 An action plan for a stronger Australia
The Government aims to ease the labour cost pressures for employers and the financial pressure
for families when a woman takes time off work to have a child, and to ensure that child care
•The Government will expand the Paid Parental Leave scheme to provide eligible parents with 26 weeks of replacement wages (up to a maximum of $50, 000), plus superannuation
to enable them to take time off work to care for their new child TPO00007 An action plan for a stronger Australia
and improve market access for goods and labour This includes â€'$5 billion over five years toward the Asset Recycling Initiative, which provides
a cost of $188. 5 million over four years to drive growth and job creation, initially for five
•The Government will improve the tax treatment of Employee Share Schemes from 1 july 2015, at a cost of $200 million over four years, with particular benefits for start-ups
Barriers to foreign investment and skilled labour have also been reduced, allowing these to move to where the commercial returns
imported business inputs, skilled labour and investor capital. Large businesses will have more opportunities to scale up for a world
hard for sales of goods and services exports, for skilled labour, for investor capital and for a
and weapon adapters for the F-35 Joint Strike Fighter project. The company has diversified also
workers, and goods and services, has been critical to the growth and development of Australia†s economy.
and labour, including from offshore, into the resources sector Economic reforms of the past allowed the economy to smoothly absorb the resources boom.
total employment (ABS, 2014b; 2014j). ) While typically associated with the retail trades, the services sector includes several high wage
This highlights the need for a nimble economy, with workers and businesses equipped with the
now has 175 staff in seven offices around the world Mining companies have turned also to the innovative solutions of
complex and hazardous working environments. The company specialises in simulation and visualisation technology, which allows miners to gain valuable insight and experience in the mines they
work in. As a result of its research and development programme VR Space has expanded the uses of its real-time interactive graphics
manufacturing activity and employment, with food processing exports currently around $19 billion per annum (ABS, 2014b;
as well as for skilled labour, for investor capital and for a place in the world†s supply chains
•Education, training and labour market arrangements that provide a highly skilled and adaptable workforce with capabilities in line with business needs, minimise barriers
to employment and redeployment, and keep unemployment levels low •Access to public and private infrastructure that facilitates the movement of people
and goods, and enables efficient communications and competitive energy costs •Risk-based regulation making and enforcement systems that target market failures
and employment-generating business. The United kingdom has cut public sector net borrowing by a third between 2009-10 and 2012-13 and is forecast to have
7th highest employment rate (OECD, 2014a; 2014d). ) Australia also ranks relatively well on the global indexes of competitiveness compiled by the World Economic Forum and the International
The most recent WEF competitiveness study (2014b) pointed to restrictive labour regulations, inefficient government bureaucracy, tax rates and regulations, and inadequate
sectors, employment outside the public related sectors of the economy has been weak Box A3 •Profiting from ideas â€
Weak private employment Australia†s employment growth has been weak since the global financial crisis, particularly in the private sector.
Nationally, employment growth has averaged just 1. 4 per cent over the past six years, around three fifths of the rate of the previous 10 years.
Jobs in the †market†sector of the economy, on which long term economic growth and government revenues
manufacturing and agriculture, employment has fallen actually (ABS, 2014j Over half of the jobs created have been
Job creation in market and non market industries since the global financial crisis *†Non-market†comprises Public Administration and
increase completion rates among Australian apprentices in priority occupations, and a $476 million Industry Skills Fund to provide training
•to improve our workplace relations system, the Government is amending the Fair Work Act 2009 and will reestablish the Australian Building and Construction Commission
•to improve infrastructure, the Government is delivering an $11. 6 billion Infrastructure Growth Package, including $5 billion for States and Territories that privatise State owned
will focus on reforms in investment and infrastructure, trade, competition, employment and participation. As G20 president, we will show leadership in presenting a new wave of economic
or work practices before they spread more broadly through the economy. The competition that this elicits challenges incumbent firms to
competition with private businesses for labour, land and capital. Finally, less government regulation will reduce business compliance costs
2. a more skilled labour force 3. better economic infrastructure; and 4. industry policy that fosters innovation and entrepreneurship
markets, develop and embrace new technologies or work practices, and respond profitably to economic changes.
to increase their profitability, productivity, employment and export penetration ABS, 2014l; Palangkaraya et al, 2014 More generally,
a founder and his or her staff, particularly their management competency and technological proficiency, affects the growth of the firm.
traders and 85 per cent have fewer than five employees (Connolly et al, 2012. The need to
different work health and safety laws also add to the complexity of operating a multi-jurisdiction business
safety, transport workers, compensation, gas and others (Boral Ltd. 2009 TPO00007 An action plan for a stronger Australia
of organisations that can opt-in to the Comcare workers†compensation and work health and safety regime.
For employers operating in multiple Australian jurisdictions this means complying with just one set of rules for all of their operations.
As not all employers are able to cover risks themselves, an alternative may be to allow other private employers to access cover under the Commonwealth laws as
premium payers rather than self-insurers The Government will commission advice about the viability of expanding access to the
will consider methods of access for employers who favour one set of arrangements yet would prefer to pay premiums rather than self-insure.
This will enable employers to choose TPO00007 An action plan for a stronger Australia Industry Innovation and C
companies, the reduction will offset the cost of the Government†s Paid Parental Leave levy.
and should boost real wage growth and employment The Government is committed to a simpler and more sustainable tax system.
•improving incentives to work, including through the interaction of the tax and transfer systems;
•removing the requirement for employers to re-offer choice to their employees when superannuation funds merge
arrangements for Employee Share Schemes TPO00007 An action plan for a stronger Australia Industry Innovation and C
Competition also gives workers a greater array of employment options. In a competitive jobs market, businesses must reward effort and
excellence as well as improve employees†skills to retain good employees Initiatives to increase international competition and improve market
access In the 1980s, 1990s and early 2000s, Australia opened up the economy to international trade
and contribute to growth, employment and transfer of new skills and technologies. To ensure that Australia is open for business,
work with other governments to facilitate trade through international trusted trader arrangements, consistent with the B20 recommendation for practical trade facilitation
of the Energy White paper, the Government will consider the recommendations and work with the States as necessary to reduce the cost of,
and workers In the petroleum industry, for instance, some companies have reported they no longer sell crude oil domestically due to the high costs and regulatory uncertainty associated with
A more skilled LABOUR FORCE To make Australia more internationally competitive, the Government will increase the skill level
•returning our workplace relations system to the sensible centre; and •boosting the workforce participation of parents
skill needs, engages employers and workers in decisions about training provision, and maintains the quality and relevance of training
The Business Council of Australia (2014a) has called for improvements to Australia†s science technology, engineering and mathematics (STEM) capabilities in particular, so that Australian
people for work, relevant skills acquisition must be a focus at all levels of the education and
This is why the Government is committed to work with State and Territory governments and the sector to improve the whole education system from primary education
effect of education on hourly wages %**Average marginal increase (per cent) in hourly wages compared with education to year 11 or below
Source: Forbes et al, 2010 TPO00007 An action plan for a stronger Australia Industry Innovation and C
•fewer than one in three Australian researchers work in industry, which is half the
Vocational education and training that prepares Australians for work The VET system is regarded generally well. Government support for VET training is extensive
$1. 4 billion per year in Commonwealth funding to support participation in apprenticeships and for other programmes targeting industry, youth and foundation skills.
A survey of employers by the National Centre for Vocational education Research (2013b) indicated that satisfaction in the ability of the system
to deliver job ready employees declined 6 percentage points, to 78 per cent, between 2011 and 2013.
and occupational labour mobility required in the modern labour market. With only around 50 per cent of apprentices completing their training,
and particularly poor completion and employment outcomes for lower level qualifications, the system also needs to pay more attention
to the needs of trainees and employers alike (NCVER, 2013a The Government is working with State governments
and industry to improve the VET sector to ensure that subsidies provided through training providers are flexible,
of employers and lift completion rates. The COAG Industry and Skills Council has agreed on objectives for reform of the VET system, including effective governance, efficient government
a taskforce to work with key stakeholders, including State governments, registered training organisations, industry groups and employers, to develop a reform plan that creates a more
agile and industry-focused VET system by •enhancing the capacity of the system to deliver high-quality outcomes for students
•increasing flexibility for training providers to meet employer needs As an initial step, the 2014-15 Budget provided
to position themselves to take advantage of new technology, innovative work practices, new and emerging opportunities, opening export markets and emerging economies.
The Government is also providing eligible apprentices with financial assistance of up to $20, 000 over the life of their apprenticeship, through the Trade Support Loans programme, for those
undertaking qualifications leading to occupations listed in the Trade Support Loans Priority List. Apprentices will be required to commence repaying the loans
when their income exceeds a minimum repayment threshold ($53, 345 in 2014-15), consistent with the arrangements for
Apprentices who successfully complete their training will receive a 20 per cent discount on the amount to be repaid
for participants, building on existing national summer schools for STEM. trialling a new, innovative pathway from education to work
to help young people successfully transition from education to work with the knowledge and capabilities, including competency in STEM subjects that are in demand by industry
Workplace learning subjects including workplace visits, project-based learning and internships will be embedded in the curriculum and school timetabling
employers will be involved actively in the design and delivery of the courses. Importantly, students will have identified pathways to
employment with the school†s industry partners. Students will be able to graduate with a Year 12 qualification,
post-school ICT diploma or advanced diploma with opportunities for employment with the businesses involved in the programme.
in an area with access to industry but high youth unemployment Proposal 10: Improving the Vocational education and Training system
A new model for apprenticeship support services The Government will implement new arrangements for delivering support to Australian
apprentices and their employers from 1 july 2015. The Australian Apprenticeship Support Network will provide a one-stop shop for employers looking to hire a new apprentice suited
to their business. It will aim to improve participation and completion rates by providing services including
•connecting apprentices and employers through targeted job matching •providing advice about different course and training delivery options
•delivering personalised mentoring and support to †at risk†apprentices •providing guidance to businesses taking on apprentices,
including on their roles and responsibilities TPO00007 An action plan for a stronger Australia Industry Innovation and C
om petitiveness A genda Industry Innovation and Competitiveness Agenda 53 the reform Agenda: Ambition 2
•managing the administration of an apprenticeship, including the training contract and •administering the Australian Apprenticeships Incentives Programme,
including employer incentives and trade support loans. pilot training scholarship programmes under the Industry skills Fund
The Government is trialling a new approach to funding training, by investing in two new
innovative pilots that will enable young job seekers in regional communities to acquire a job and provide employers the skilled employees they need to grow their business
•training for Employment Scholarships: 7, 500 scholarships will be provided to smaller employers who take on a new worker, aged 18†24, in regional Australia and areas
where youth unemployment is high. Approved employers will be able to engage a training provider of their choice
and be reimbursed for the cost of up to 26 weeks of training once their employee completes their training
•Youth employment Pathways: This will provide support for training 3, 000 disengaged young people, aged 15†18 in regional Australia and areas of identified higher levels
of youth disengagement. Community groups would be eligible to receive funding for each person they put through a job-ready youth programme.
The full value would only be redeemable once the trainee goes into employment or further study after
completing their training. streamlining governance and regulation Further steps will be taken to ensure a role for industry at all levels of the training system
to improve VET regulation and reduce unnecessary red tape. These include •moving the national regulator, the Australian Skills Quality Authority (ASQA), to a
ongoing work programme The Government is working to address additional issues in the VET sector,
apprenticeships The Government is working with States and Territories through COAG, the COAG Industry and Skills Council and the Reform of the Federation White paper on these and other
for Australian workers too. Skilled migrants also often bring capital, or can help to attract it, and
Highly skilled workers are becoming increasingly internationally mobile. As their skills are in high demand globally and are readily transferable across borders,
these workers have a great many choices about where they work. Australia needs to maintain a welcoming attitude towards
otherwise work for our competitors While migration has been a hallmark of Australia†s development, many Australians have
concerns that large inflows of foreign labour could place pressure on wages, conditions and jobs. This is of particular concern for those with low skills
and retaining employment This highlights the importance of focusing on skilled migration, which can increase the
employment prospects and incomes of lower skilled Australians. Business groups have emphasised the importance of skilled migration for increasing the skills of Australian workers
and for the viability and competitiveness of operations in Australia more generally TPO00007 An action plan for a stronger Australia
It offers business an avenue to quickly access skilled workers, where genuine skills shortages exist, to enable projects to proceed.
Employers overwhelmingly prefer to hire Australian workers as it is cheaper and faster to fill skills requirements locally where
there are suitable workers. But the 457 visa programme is very important for filling roles with temporary skilled migrants where there are genuine skills shortages
In February 2014, the Government established an Independent Review of the Integrity of the 457 Programme, to examine how to maintain the programme†s integrity as a means
of filling genuine skills gaps in the local labour market while not placing unnecessary administrative burdens on business.
workers. The Review heard that the current design of the programme delays and limits the ability of businesses to fill skill gaps
the programme to ensure that Australian workers have priority. The Government will •streamline the processing of sponsorship, nomination and visa applications around
in a way that grows employment opportunities for Australians. In the 2014-15 Budget, the Government reconfirmed its focus on skilled migration,
reorientation towards employer-sponsored visas, assisting employers to find workers to fill vital positions where they have been unable to find local workers
TPO00007 An action plan for a stronger Australia Industry Innovation and C om petitiveness A
genda Industry Innovation and Competitiveness Agenda 56 Industry Innovation And Competitiveness Agenda •provide greater flexibility in relation to English language testing and skill requirements
We will continue to work with industry to ensure that the process of recruiting overseas
workers is less cumbersome and expensive. At the same time, the Government will improve employment opportunities and outcomes for Australians
Changes to give effect to these decisions will be rolled out in phases during 2014-15 Proposal 12:
Returning the workplace relations system to the sensible centre Workplace relations regulation has become too rigid
and is hurting Australia†s competitiveness The workplace relations system has an important role in ensuring workers†rights, pay and
conditions are fair and appropriate. At the same time, businesses need the flexibility to adapt and seize new opportunities
and workers must be free to negotiate working arrangements that suit their personal ambitions and circumstances.
and our workplace relations system must do the same, otherwise our businesses and workers will be left behind.
The Government is committed to returning the workplace relations system to the sensible centre The Fair Work Act 2009 provides the legislative framework underpinning the national workplace
relations system, which covers the majority of Australian workplaces. The Government is committed to keeping the Fair Work framework,
but we want to ensure it helps build a more stable, fair and prosperous future for Australia†s workforce, businesses and the economy.
To this end, the Government has promised that the Productivity Commission will be asked to undertake a comprehensive review of the workplace relations framework, including the Fair Work laws
This will include an assessment of the impact of the framework on productivity, how it could be
improved to promote more jobs, better wages and living standards, make workplaces operate better and reduce red tape.
The Commission†s recommendations will inform any workplace relations policy the Government takes to the next election
In the meantime, consistent with our pre-election commitments, we have a significant agenda we are advancing in this term of government
needs an effective regulator, yet the previous Government replaced the ABCC with Fair Work Building and Construction (FWBC),
with reduced days lost to industrial disputes, greater productivity in key parts of the industry and better management-worker relations.
The new ABCC and higher penalties for unlawful conduct will again ensure work is carried out fairly, efficiently
and productively Second, the Government introduced legislation to deliver better protection for members of Australia†s trade unions and employer organisations by better aligning the responsibilities of
and penalties for, the officers of Registered Organisations with those of company directors. A Registered Organisations Commission will be established to improve oversight, with investigative
Third, several problems are being addressed through our Fair Work Amendment Bill 2014, which aims to restore balance to the workplace relations system by
•Removing the capacity of unions to frustrate greenfields agreements bargaining through unsustainable claims and delays †Negotiations for greenfields agreements (for new
workplaces. Submissions to the 2012 Fair Work Act Review showed some unions have exploited this exemption for greenfield agreements to pursue excessive wage claims and
delay the commencement of projects, creating doubt over whether a project will proceed Mccallum, Moore, & Edwards, 2012.
within three months, the employer will, subject to appropriate safeguards, be able to have the Fair Work Commission approve the agreement
•Restoring union workplace access rules and reducing excessive right-of-entry visits by union officials †The current right of entry provisions are broader than under previous workplace
relations legislation. Under the Fair Work Act, union officials with an entry permit have TPO00007
An action plan for a stronger Australia Industry Innovation and C om petitiveness A genda
Industry Innovation and Competitiveness Agenda 59 the reform Agenda: Ambition 2 a right to access workplaces including those that do not have any members.
The 2012 Fair Work Act Review found this has led to frequent use of entry rights by some unions
The Review notes that during the construction phase of BHP Billiton†s Worsley Alumina plant, visits by union officials increased from zero in 2007 to 792 visits in 2010 (Mccallum
The Bill provides that a union is entitled to enter a workplace for discussion purposes only if it is covered by an enterprise agreement,
the Bill ensures the Fair Work Commission can properly deal with excessive right of entry visits †for example, by suspending,
•Improving workplace flexibility by enhancing the scope for employees to make individual flexibility arrangements that meet their genuine needs †Under the Fair Work Act
employees and employers should be able to achieve flexibility in the workplace through individual flexibility arrangements (IFAS.
However, the Fair Work Act currently allows enterprise agreements to restrict the use of IFAS.
This means that employees covered by an enterprise agreement may be denied the opportunity for more suitable workplace
arrangements even if their employer agrees. The Bill provides workers with fair flexibility by ensuring IFAS can be made in relation to a minimum of five key conditions
•Closing the †strike first, talk later†loophole in the good faith bargaining rules †The Fair
Work laws enable industrial action in support of claims for a new enterprise agreement before bargaining has commenced.
The Bill ensures industrial action cannot be the first step in the bargaining process The Government will further amend the Fair Work legislation to ensure that protected industrial
action can only happen after there have been genuine and meaningful talks between workers and business during enterprise bargaining
and only in support of claims that are not manifestly excessive and would not have a manifestly adverse impact on workplace productivity.
We will also require employees and employers to consider productivity improvements when bargaining for an enterprise agreement
Boosting the workforce participation of parents The Government aims to boost women†s workforce participation to help increase Australia†s
labour force and GDP, and this will be supported by the proposed Paid Parental Leave (PPL scheme and informed by the Productivity Commission review of Childcare and Early childhood
Education The gap between women†s and men†s labour force participation rate is 16.7 percentage points
for those aged 25 to 34 years and 11.9 percentage points for those aged 15 years and older
OECD, 2014b. Closing the gap in the participation rate between women and men is estimated to boost Australia†s GDP by 13 per cent (Toohey, 2013.
The availability of paid parental leave and affordable childcare are supported strongly by international organisations to assist women†s
workforce participation (OECD et al, 2014; Elborgh-Woytek et al, 2013 TPO00007 An action plan for a stronger Australia
Industry Innovation and C om petitiveness A genda Industry Innovation and Competitiveness Agenda 60 Industry Innovation And Competitiveness Agenda
of $50, 000) or the national minimum wage, whichever is greater, plus superannuation (at the Superannuation Guarantee rate), providing parents with greater financial support to care
supporting women to remain engaged with their employer. In addition, the Government aims to ease the administrative burden on employers by taking responsibility for making payments
to eligible employees The Productivity Commission†s review is examining the contribution that affordable, quality child
care can make to increased workforce participation (particularly for women), children†s learning and development, the current and future need for child care in Australia,
skilled labour, facilitates information and technology transfer, and allows greater specialisation by businesses and workers.
Better economic infrastructure can also reduce or eliminate travel time and job search costs, allowing workers to access more distant workplaces.
These benefits are particularly important for Australia due to its geographical size, dispersed population and distance from overseas markets.
and allocated $300 million for pre-construction works in the 2014-15 Budget. The Budget also provided
outcomes of this work may be considered in the Developing Northern Australia and Agricultural Competitiveness White papers Infrastructure for the future
infrastructure in that they provide employment for more people in operation than they do in construction. A new airport at Badgerys Creek
Alongside this work, the Government has commissioned Infrastructure Australia to audit critical water, energy, communication and transport infrastructure in northern Australia and separately
These independent audits will help to inform the approaches and work programme on water supply and use over the coming years
delivered more than half of the engineering construction work done for the public sector in recent years, compared with around one third in 1986 (ABS, 2014g;
required hard work, networking and knowing the market. Founder and Director, Penny Street says †being the first audio tour company in India
and medium enterprises, accelerating industry growth and job creation. Much of this information is akin to a public good,
and to help businesses train staff with the skills they need The $484. 2 million Entrepreneurs†Infrastructure Programme,
experienced private sector experts •help small and medium businesses become more competitive by working with the research
Upgrading the skills of all types of workers including managers, is central to firm performance in knowledge-based economies
innovative work practices, new and emerging opportunities, opening export markets and emerging economies. Larger companies may apply to access the Fund,
which will provide apprentices with financial assistance of up to $20, 000 over the life of their apprenticeship
The Government is also helping Australian businesses develop international markets and win productive foreign direct investment.
labour-intensive feeding methods on farms and is the result of the firm†s long term commitment
employees to have recognised their skills and provide training for new jobs, while they are still
and assist automotive employees to secure new jobs; assist automotive supply chain firms capable of diversifying to enter new markets;
In addition, the Centre would work with regulators to improve the efficiency of the regulatory framework, while ensuring it
Success of the Centres will be measured by increased investment, employment, productivity and sales, reductions in red tape, improved industry-research links and more businesses
•ensuring research training prepares researchers to work with industry and bring their ideas to market
Improve taxation arrangements for Employee Share Schemes Job creation and productivity growth don†t just happen in a vacuum,
they are supported by entrepreneurship and a flourishing start-up community (Decker et al, 2014. Indeed, many of the
and international research suggests that companies in which employees have an ownership interest are more productive than those that do not
An employee share scheme Where an employer provides a financial interest in their company (usually through
shares or options) to their employee (s) in relation to their employment TPO00007 An action plan for a stronger Australia
Industry Innovation and C om petitiveness A genda Industry Innovation and Competitiveness Agenda 77 the reform Agenda:
Ambition 4 Employee Share Schemes (ESS) are used in many countries to attract and retain high
quality staff to innovative start-up companies by providing them with a financial share of the potential upside of success of the company.
This is usually provided either by way of shares in the company a person works for (that is, an actual ownership share in
the company) or as options (a right to purchase shares at some future point, at a †strike
price†set out in an options contract Under the general income tax law, if an employee is provided with shares or options
through an ESS, any discount that the employee receives by acquiring the shares or options, relative to the market price, is a benefit relating to employment and so would
usually be considered income of the employee Prior to 2009, employees could choose to have qualifying ESS shares
or options taxed up-front or at a deferred taxing point (subject to certain conditions In 2009, changes were made to how the ESS arrangements are taxed.
Shares provided under an ESS are taxed currently up-front (when provided to the employee) unless there
is a risk that the employee will forfeit the shares, in which case taxation is deferred
until the shares †vest†(that is, are provided unconditionally to the employee. Options provided under an ESS are taxed generally when they †vestâ€, rather than when the
employee decides to exercise the options to purchase shares in the company, as was previously the case.
The tax treatment of options is particularly problematic because it taxes employees before they have the opportunity to convert their options to shares
and realise any actual gain by selling the underlying shares The 2009 changes effectively ended the provision of ESS options to employees
particularly by start-ups, and stakeholders have noted that the changes detracted from the goal of commercialising good ideas in Australia.
Successful entrepreneurs also stated that the changes have reduced their ability to use ESS as a key remuneration tool to find
employee receives the options. This will defer the taxing point to a point at which most
employees can take some practical action to realise the benefits of the underlying share TPO00007
to offer ESS shares and options to their employees at a small discount, and have that
the employee for at least three years. Tax on the discount provided by the employer may be deferred or exempt depending on
whether the employee receives options or shares. Criteria will define eligibility for this concessional treatment,
including the company having aggregate turnover of not more than $50 million, being unlisted and being incorporated for less than 10 years
provisions introduced in 2009 and the $1, 000 up-front tax concession for employees who earn less than $180,
making it easier for employees to have a stake in a business The owner of start-up XYZ Pty Ltd wants to give his six employees a stake in the future growth of the
business, so he offers them free options to buy shares in his company at a future date, at a set price
He wants to do this so the employees have a strong incentive to help the business grow.
and assuming there is no risk of forfeiting the options, if the employees accept the options then they will have to pay tax on the free options in the income year they are provided
This means the employees would have to pay tax before they have the ability to get a
This situation has discouraged the provision of options under employee share schemes, to the detriment of productivity growth and innovation
certain conditions, the employees of eligible small start-up businesses will not pay tax on any discount
For employees of businesses that are not eligible for the start-up concession, the tax can instead be
discount to employees †and that discount would be tax-free More details and examples are available in the Employee Share Schemes fact sheet attached to the
related joint press release TPO00007 An action plan for a stronger Australia Industry Innovation and C
conditions, the employee could choose between up-front and deferred taxation For options, a deferred taxation
point occurred when the employee exercised the options by converting the options into shares Default position is up-front taxation
the employee forfeiting the shares or options, and schemes provided through salary sacrifice (up to $5, 000, and subject to conditions
moved back to when the employee exercises the options Going forward -start-ups only Options and shares that are
ESS is the recipient†s employer (or employer†s holding company) and that the employee not hold more
than a 5 per cent interest (or 5 per cent of voting rights) in the company
and embrace new technologies or work practices, and respond profitably to economic changes. Indeed, small businesses are ideal test beds for driving
talented employees, and compliance burdens generally have a larger proportionate impact on small businesses. This is partly because small businesses have limited
On the big issues for competition policy, workplace relations and taxation, the Government has committed to major reviews.
undertake a comprehensive review of the operation and impact of Australia†s workplace relations framework.
competitiveness, and improving incentives to work and save Implementing the Competitiveness Agenda The Competitiveness Agenda focuses on what we can do now to improve competitiveness and
•creating a more skilled labour force •building economic infrastructure to drive productivity; and •fostering innovation and entrepreneurship in our industries
The Minister for Employment will oversee further consultations to identify the viability of and best way to expand access to the
and work health safety and laws to eligible private employers as premium payers Late 2014 †early 2015
TPO00007 An action plan for a stronger Australia Industry Innovation and C om petitiveness A
A more skilled labour force 9. Increasing the focus on STEM and innovation in schools The Department of education will
arrangements for Employee Share Schemes The Department of the treasury will conduct stakeholder engagement to refine legislation prior to introduction
ESS Employee Share Schemes FWBC Fair Work Building and Construction GDP Gross domestic product IFA Individual Flexibility Arrangements
IIASA International Institute of Applied Systems analysis ILO International labour organization IMD Institute of Management Development IMF International monetary fund
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