Technology companies are among the startups set to benefit from increases to current thresholds of exempt employee share schemes, says Science, Innovation and Technology Minister, Judith Collins.
Tax exempt thresholds for the schemes are increasing as part of the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill, which has had its first reading in Parliament.
The Bill proposes increasing the thresholds relating to exempt employee share schemes to recognise the effect of past inflation and to provide a buffer against future inflation.
“The changes adjust for inflation and lift the tax exempt thresholds of these schemes, which could boost recruitment and help early-stage companies, including startups, to succeed,” Ms Collins says.
“This is the first step towards meeting our commitment of supporting startups by looking at changes to the tax system.
“We are committed to rebuilding the economy, and this is one of the many levers we will use to achieve that.”
New Zealand’s tech sector contributed $22.56 billion to GDP in 2023, employing nearly 119,500 people in 25,500-plus businesses.
“The Bill proposes lifting the maximum value of shares offered to employees under the scheme from $5000 to $7500 a year, and raising the maximum discount an employer can provide on the market value of those shares from $2000 to $3000,” said Revenue Minister, Simon Watts.
Employee share schemes are arrangements where shares in an employer company are provided in whole or in part in return for services.
They are a tool employers use, particularly in the startup and tech sector, to align employees’ work incentives with the economic goals of their employers.
“We are also looking into aspects of the Foreign Investment Funds regime as we work to grow economic investment and productivity. Public feedback on this will be considered as the Government reviews the Tax and Social Policy Work Programme,” Mr Watts says.
The proposed amendment would be effective for offers of shares made under exempt employee share schemes on and after 1 April 2025.
