In mid-March, the Australian Federal Government introduced new early-stage investor tax incentives to Parliament. The Tax Laws Amendment (Tax Incentives for Innovation) Bill, as it it’s titled, has been noted by industry leaders as arguably the most generous start-up investor scheme in the world.
The technicalities of the new tax incentives are outlined below:
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.
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.
It is predicted that following the Royal Assent, the tax incentives should apply from the 2016-17 income year. The amendments will apply to shares issued on or after 1 July 2016 or Royal Assent (whichever comes last).
Undeniably, the new tax laws are a key element of Australia’s plan to encourage greater risk-taking to ease the pain of an economic transition from the mining boom to the ideas boom. In addition, when bearing in mind other tax incentives on offer, such as the research and development (R&D) tax incentive, the enticement to innovate in Australia is mounting. In essence, any Australian firm developing or improving products, processes, or software, may be eligible for the R&D Tax Incentive. However, with the deadline for claiming the R&D tax incentive looming on April 30, companies must act quickly to ensure they don’t miss out on the currently available, and potentially significant, tax benefits.
Contact Ausgrant today if you would like more information about the R&D Tax Incentive and if your company qualifies.
