Further to our recent updates, the Federal Government has now introduced legislation to ensure that innovative and high growth start-ups are supported at different stages of development. The Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 was introduced into Parliament on 16 March 2016.

The legislation seeks to align the tax system and business laws with a culture of entrepreneurship and innovation, and is expected to come into force from 1 July 2016.

Tax Incentives for Early Stage Investors

  • Investors will be given concessional tax treatment to foster new enterprises and promote entrepreneurship.
  • This includes a 20 per cent non-refundable tax offset on investments in qualifying companies, and a ten year exemption on capital gains tax for investments held for 12 months or more.

The Treasurer in his second reading speech to Parliament said: “These measures have specifically been designed to foster a shift towards a culture of innovation, whereby entrepreneurial risk-taking is encouraged and rewarded. The tax incentives for early stage investor’s measure aims to support early stage investment by encouraging more businesses to develop innovative ideas.” For more information, click here.

New Arrangements for Venture Capital Limited Partnerships

  • There will be changes to the tax treatment of Early Stage Venture Capital Limited Partnerships (ESVCLP) with an aim to attract more investment into venture capital.
  • Investors will receive a 10 per cent non-refundable carry forward tax offset on capital invested through an ESVCLP.
  • The maximum fund size for new and existing ESVCLPs will be increased from $100 million to $200 million.

In the same speech the Treasurer also said: “The tax incentives for funding provided through venture capital limited partnerships including early stage venture capital limited partnerships are designed to attract investments at the growth stage of a company's development. At this stage, entrepreneurs can face further difficulties accessing funding, despite typically receiving a few rounds of initial funding, as they are not yet able to market themselves for public or broader investor buy-in. Although Australia has experienced recent momentum in this field, with over $600 million in venture capital raised or planned since 30 June 2015, this funding has been generally concentrated within the technology sector. The measure will continue to build on the current momentum through improving funding for promising projects across the economy and in industries beyond the technology sector.” For more information, click here.

Hopefully the anticipated Federal election will not delay the commencement of these measures or their passing through the Parliament.