The ABC understands the Federal Government has been forced to look for a fix to tax laws which start-ups say are crippling their viability.

At the CeBIT business technology exhibition in Sydney, it was a talking point among the 100 start-ups that gathered to show off their wares.

Fast growth companies, or start-ups, have been complaining since 2009 about what they say are complex and onerous laws surrounding Employee Share Option Programs (ESOPs).

ESOPs are a critical currency for luring talent away from big companies with the promise of big rewards if the business is sold.

But unlike in the United States, the shares are taxed from the moment they are offered - despite not having any real value.

For instance, imagine you joined a start-up worth $1 million with a salary of $50,000 and a 10 per cent share of the company.

You could not cash that 10 per cent share in until the company is sold in the future.

In the eyes of the tax man, your income is $150,000, even though you only earned a $50,000 salary.

After the tax office has taken its share of $43,447, you are left with just $6,553.

"It's like walking into a newsagency, buying a lotto ticket for $10 and then having to pay another $100 in case you win," said Mick Liubinskas, the chief executive of Pollenizer.

Pollenizer is a company working to foster the development of start-ups in Australia.

"When you're starting a brand new company you're starting with typically no money - so you've got a big idea, lots of potential ... but there's no money," Mr Liubinskas said.

"What you do is carve up the company and you share it between you.

"Where it becomes really difficult is when you start to have some success...when you've got some value but you don't have enough cash but you're trying to lure someone away from a big salary."

Norton Rose lawyer Nick Abrahams says copying the model in the United States would be the best solution.

"In a nutshell, the American laws tax employee share options when the employee exercises the option," he said.

"So once you exercise the option you would then have money so you would be able to pay the tax."

It's understood Communications Minister Stephen Conroy's update to the National Digital Economy Strategy will consider the issue.

The strategy is expected to be released in a few weeks.

One analysts has suggested that the Libs could massively increase their already large lead by promising a wide range of small business reforms of which this is just one example. even a labor-leaning small business owner being hampered by labors anti-business, pro-union, pro regulation regime could be moved the liberal side by a policy to make things easier for them. and that is without a relaxation of the IR laws that are draconian in many ways already.

It's not just start up companies that end up impacted by some of rescinding if grants implemented by the Federal Labor Party.

In their mad rush attempt to get their much desired surplus the Federal Labor Government detailed to us (and all of our competitors) that R&D grants on streamlining of energy delivery, of improvement in shale fracking processes, of offshore exploration within Australian waters, would all be either cut or completely removed.

This had the effect of millions of dollars falling on industry - while the Government continues to reap the rewards of this R&D work.
This has hit the smaller exploration companies in Australia who end up needing to team with the bigger multi nationals just to stay afloat.

In recent meetings the industry had with Julie Bishop and Josh Frydenberg, it seems there will be a likelihood these grants will come back and make Australia again a more attractive place to carry out R&D.

The current Government I have to say have been disappointingly short sighted - particularly with the energy industry - in it's need to deliver a short term surplus and without thinking of how cuts they make will impact the longer term future.