As part of the Federal Government’s innovation package, the government announced changes to the Significant Investment Visa, upcoming tax incentives for investors in start-ups and a new Entrepreneur Visa.
These announcements are part of a suite of innovation initiatives that will assist foreign investors to invest in Australia’s technology boom, and facilitate skilled and business migration to assist the emerging markets in Australia.
Changes to the Significant Investor Visa: sources of funding for Australian start-ups
Changes to the Significant Investor Visa (SIV), which came in to effect on 1 July 2015, have focused foreign investment on emerging enterprises, venture capital and growth private equity funds investing in start-ups and small proprietary companies.
The SIV is a provisional visa that provides a pathway to permanent residency for SIV holders who meet certain requirements (including eligible investment, residency and employment requirements).
SIV applicants must invest at least A$5 million in complying significant investments over four years in the following proportions:
- at least A$500,000 in eligible Australian venture capital or growth private equity fund(s) investing in start-ups and small private companies
- at least A$1.5 million in an eligible managed fund(s) or Listed Investment Companies (LICs) that invest in ‘emerging companies’ listed on the ASX
- a ‘balancing investment’ of up to A$3 million in managed fund(s) or LICs that invest in a combination of eligible assets that include ASX listed companies, infrastructure trusts, preferred equity, eligible corporate bonds or notes, deferred annuities and real property (subject to the 10% limit on residential real estate).
More tax incentives for investments in Australian start-ups
The Federal Government proposes to implement further tax incentives for investors who invest in complying start-up companies. If the measurers are passed and become law, the new tax incentives will include:
- a 20% non-refundable carry-forward tax offset on the value of their investments in newly issued shares, capped at $200,000 per investor per year and subject to annual investment limits for non-sophisticated investors, and
- an exemption for capital gains realised on shares in qualifying start-up that have been held for between one and ten years. But investors must disregard any capital losses on shares in qualifying start-ups held for less than ten years.
These measures are intended to apply to shares issued from 1 July 2016 or the date when the Bill becomes law (whichever is later).
Innovative ideas + $? Consider making Australia home (new Entrepreneur Visa)
The ‘Entrepreneur Visa’ is proposed to be introduced as a new provisional visa in November 2016. It is intended to provide a new pathway to permanent residency and be established as a new stream within the existing Business Innovation and Investment Programme.
Ideal candidates for this visa will be entrepreneurs with high-growth potential ideas capable of being implemented in Australia and who have obtained capital backing from a third party.
With this new visa, the government hopes to boost economic growth and jobs, particularly in the information and communications technology (ICT) and science, technology, engineering and mathematics (STEM) sectors.
The changes to the SIV and the proposed tax incentives and new Entrepreneur visa provide new opportunities for foreign investors and entrepreneurs to participate in and support the Australian emerging markets.