The Government has announced new initiatives aimed at promoting investment into start up entities in Australia.
The Government recognises that entrepreneurs and innovators tend to head overseas (mainly to the UK and US) in order to access funding for their start up projects. These new initiatives are aimed at retaining such innovation in Australia and promoting a culture of entrepreneurship and innovation.
Investors into innovative start ups will receive a 20% non-refundable tax offset based on the amount of their investment, capped at $200,000 per investor per year. Investors will also be exempt from capital gains tax on disposal of their investments held for three years. This initiative mirrors the Seed Enterprise Investment Scheme in the UK which resulted in over $500 million in funding to over 2900 start up companies.
Further tax changes proposed to benefit start up companies include:
There are currently approximately 25 registered and unregistered ESVCLPs in Australia. The current tax concessions available to ESVCLPs have been around for a while but have not successfully attracted significant investment nor an influx of new funds. Additional tax incentives are being provided to investors in ESVCLPs which include:
There has been a flurry of fund managers setting up such funds in mid 2015 when the Government amended the Significant Investor Visa program to require applicants to invest at least $500,000 (of the $5 million) in eligible Australian venture capital or growth private equity funds investing in start up and small private companies in order to be eligible for the visa. The Government is hopeful that the following changes will attract further investment:
The proposed start date for the majority of these initiatives is 1 July 2016. We will need to wait and see whether these initiatives will achieve the intended outcome of boosting funding into start ups and encouraging a culture of entrepreneurship and innovation in Australia.