series of “world leading” tax incentives<\/a> aimed at encouraging early-stage investment in startups will officially come into effect from July after being passed by the Senate on Wednesday morning in a “triumph” for the Australian startup ecosystem.<\/p>\nThe Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016, first announced as part of last year’s $1.1 billion innovation statement, passed smoothly with the support of the opposition, including slight alterations that were confirmed in Tuesday night’s budget.<\/p>\n
StartupAUS CEO Alex McCauley says this is a “huge win” for Australian startups.<\/p>\n
“It will rapidly increase the amount of capital available to them, and the sources of capital they can call on,” McCauley says.<\/p>\n
“It’s also a huge win for anyone interested in investing in startups. They now have the world’s most generous incentive to explore the investment opportunities available in this exciting space.”<\/p>\n
The tax incentives for early-stage startup investments include a 20% tax offset on investments in eligible “innovation companies” and a 10-year tax exemption from the capital gains tax on investments held for at least 12 months.<\/p>\n
These eligible companies will have to meet set criteria to be determined as “innovative”, must be under three years old and have expenditure of $1 million or less with assessable income of less than $200,000 in the past income year.<\/p>\n
The tax cuts will also be on offer to non-sophisticated investors, but with an investment cap of $50,000 per year.<\/p>\n
The fund size for Early Stage Venture Capital Limited Partners will also be increased from $100 million to $200 million, with the tax offsets back-dated for existing funds.<\/p>\n
McCauley adds that it’s important the tax incentives have been passed before the upcoming early election in July.<\/p>\n
“There has been a Herculean effort by government at all levels to get this legislation right, and to get it across the line as soon as possible,” he says.<\/p>\n
“There was a real risk that if it wasn’t ready in time this measure would be lost in the chaos of an early election.<\/p>\n
“The fact that the government has kept working hard on this through the turmoil of an early budget and an early election is gratifying.<\/p>\n
“This reaffirms the centrality of startups to the Turnbull government’s national economic agenda.”<\/p>\n
Minister for innovation Christopher Pyne says the tax incentives are a core componenent of the government’s innovation agenda.<\/p>\n
“They will promote investment in innovative high-growth potential startup companies and improve businesses’ access to venture capital,” Pyne says in a statement.<\/p>\n
“Over 4500 startups are missing out on equity finance each year. These measures will help startups get access to crucial funding to grow their startups.<\/p>\n
“Investors, venture capital funds and innovative companies in all industries will benefit from these measures.”<\/p>\n
According to the opposition’s startup spokesperson Ed Husic, the attention now turns to the government’s more controversial innovation policies.<\/p>\n