New tax arrangements set to stimulate start-ups
Hooray! Today brings good news for entrepreneurs and venture capitalists.
The Australian Government has announced new tax arrangements that are expected to be passed through Federal Parliament tomorrow as one of its last activities before brining forward the budget and heading to a July election.
These reforms will be viewed as a much-needed demonstration of the Government’s National Innovation and Science Agenda, which has so far been criticised for failing to deliver real policy settings.
The new laws are designed to encourage risk-taking by start-ups, and for their activities to look more attractive to investors. Here’s an overview of the changes:
The Tax Incentive for Early Stage Investors
- A 20% non-refundable carry forward tax offset on investments in qualifying companies
- Offset capped at $200,000 per investor per year
- A 10-year exemption on capital gains tax (provided investments are held for 12 months or more).
The New Arrangements for Venture Capital Limited Partnerships
- A new arrangement for the tax treatment of Early Stage Venture Capital Limited Partnerships (ESVCLP)
- Investors will receive a 10% non-refundable carry forward tax offset on capital invested through an ESVCLP
- The maximum fund size for new and existing ESVCLPs will be increased to $200 million
- A number of minor reforms are to be made to the income tax treatment of venture capital.
Hopefully, these measures will begin to stimulate the start-up economy is Australia. With many investors sitting on the sidelines waiting to see what financial advantages will be brought forward by the Government, this legislation could be the ‘green light’ that many have been waiting for.