Late last year the Commonwealth Government released its National Innovation and Science Agenda. The Agenda lists a range of measures that the Government intends to implement to foster innovation and entrepreneurship in Australia.
Following are some of the proposed items from the agenda that we found interesting.
1. Proposed Tax Incentives for Early State Investors
The Government proposes to introduce measures whereby investors can receive a 20% non-refundable tax offset based on the amount invested directly in a qualifying start-up. Investments eligible for this offset are capped at $200,000 per year. These investments, if held for a minimum of three years, could be eligible for a 10 year capital gains tax exemption. The definition of qualifying investment and other integrity measurers are yet to be finalised.
It is expected that these measures will commence from 1 July 2016. The delay between announcement of these measures and the commencement date could potentially put new investments in start-ups at risk, as investors wait for the measures to be implemented and more details of the measures to be released.
2. Venture Capital Limited Partnerships
Under the proposed new arrangements:
- partners in a new Early Stage Venture Capital Limited Partnership (“ESVCLP”) will receive a 10% non-refundable tax offset on capital invested during the year;
- the maximum fund size for new ESVCLPs will be increased from $100 million to $200 million; and
- ESVCLPs will no longer need to divest a company when its value exceeds $250 million.
It is expected that these measures will commence from 1 July 2016. Again, the delay between announcement of these measures and the commencement date could potentially put new investments in ESVCLP at risk, as investors wait for the commencement date and more details of the measures to be released.
3. Business Research and Innovation Initiative for SME’s
The Government aims to stimulate SMEs to develop innovative solutions to Government policy and service delivery problems. It is proposed that Innovation and Science Australia will select challenges, in which SMEs will submit proposals and if successful, the SME’s could receive grant funding for up to $100,000 so that their idea can be tested. The most successful ideas could be eligible for a further grant of up to $1,000,000 to develop a prototype or proof of concept. It is proposed that this will commence from 1 July 2016.
4. Biomedical Translation Fund
The Government proposes to establish a new $250 million Biomedical Translation Fund. The aim of this fund is to commercialise biomedical innovations, and to bridge the gap between early stage and late stage biomedical research with selected fund managers. These fund managers will need to have at least matching funding from the private sector for investment. This fund is expected to be established in 2016.
Representatives from Russell Kennedy will be attending the upcoming briefing on the Biomedical Translation Fund.
5. Insolvency Law Reform
The Government is considering the following changes to insolvency laws:
- reducing default bankruptcy period from three years to one year;
- introducing a safe harbour for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan; and
- making clauses in contracts that allow contracts to terminate solely for an insolvency event to be unenforceable if a company is undertaking a restructure.
It is expected that a proposal paper will be released in the first half of 2016, with the Government aiming to have these reforms passed by Parliament in mid-2017.
6. Global Innovation
The Government intends on establishing 5 “landing pads” in global locations to support Australian entrepreneurs to expand their business and research opportunities in that location. The first landing pads will be located in Tel Aviv and Silicon Valley, with the Government yet to announce the location of the 3 remaining landing pads. These landing pads are to include a physical space whereby Australian start-ups can access mentors, investors and other important connections.
7. Sharing public data
The Government aims to release more non-sensitive public data so that the private sector can put this data to better use. It is hoped that the release of this data will lead to the private sector creating new products and services. Some data has already been released and can be accessed on www.data.gov.au.
There are a range of other initiatives that the Government proposes to introduce, and details are available at www.innovation.gov.au