Govt Increases Tax Exempt Thresholds for Employee Share Schemes to Boost Startups

The changes are part of the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill, which has passed its first reading in Parliament.

Technology startups are set to benefit from increased tax-exempt thresholds for employee share schemes, according to Science, Innovation and Technology Minister Judith Collins and Revenue Minister Simon Watts. The changes are part of the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill, which has passed its first reading in Parliament.

The Bill aims to adjust the thresholds for exempt employee share schemes, accounting for past inflation and providing a buffer against future inflation.

“These changes will help early-stage companies, particularly startups, by adjusting the tax-exempt thresholds, which could enhance recruitment efforts and support their success,” said Minister Collins. She emphasized that this move is part of the government's broader strategy to support startups and rebuild the economy through targeted tax system reforms.

The tech sector, a significant contributor to New Zealand’s economy with $22.56 billion added to GDP in 2023, is expected to benefit greatly from these adjustments. The sector employs over 119,500 people across more than 25,500 businesses.

Revenue Minister Simon Watts explained that the Bill proposes raising the maximum value of shares offered to employees under these schemes from $5000 to $7500 annually and increasing the maximum discount employers can provide on the market value of shares from $2000 to $3000.

Employee share schemes, commonly used by startups and tech companies, help align employees' incentives with the economic goals of their employers.

Watts added that the Government is also reviewing aspects of the Foreign Investment Funds regime to further boost economic investment and productivity. Public feedback will play a role in shaping the ongoing review of the Tax and Social Policy Work Programme.