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Budget suggests crowdsourced equity funding scheme coming soon

Tuesday, 12 May 2015 | By Kye White

Australia will likely have a crowdsourced equity funding scheme in place before the end of the 2015-16 financial year.


The 2015-16 Federal Budget includes  $7.8 million in funding over four years from 2015-16 to enable the Australian Securities and Investments Commission to implement and monitor a regulatory framework to facilitate the use of crowdsourced equity funding, including simplified reporting and disclosure requirements.


A total of $2.6 million is budgeted for the 2015-16 financial year, suggesting the framework will be in place by the end of that period.


Crowdsourced equity funding would allow startups and small businesses to raise capital by offering equity to a large number of small-scale retail investors through platforms like VentureCrowd and Equitise. Currently only wholesale investors, those with more than $2.5 million in investable assets or annual earnings of $250,000, are able to able invest via crowdsourced equity funding.


The specific makeup of the legislation is still an unknown. The government says the new law will balance supporting investment, reducing compliance costs for small businesses and maintaining an appropriate level of investor protection.


Last year the Corporations and Markets Advisory Committee recommended Australia introduce legislation allowing retail investors to invest up to $10,000 a year via equity crowdfunding, across at least four startups or businesses. It suggests companies be allowed to raise up to $2 million per year on such platforms.


In February Small Business Minister Bruce Billson said he hopes to introduce the legislation in the springs session of parliament.


In a joint statement with Prime Minister Tony Abbott, Billson said crowd-sourced equity funding will help promote small business access to finance by increasing the availability go innovative sources of funding.