Earlier this week the government released it's innovation statement announcing tax breaks and law changes to encourage and entice innovation and investment in entrepreneurial start-ups.
Key tax incentives included in the announcement include:
- Early stage investor tax break- expected to commence 1 July 2016
- Changes to company losses tests
- Changes to employee share schemes
- Changes to Depreciation rules for intangible assets
- Tax offset for early stage venture capital partnerships - expected to commence in July 2016
- Insolvency reforms
Early stage investor tax break- expected to commence 1 July 2016
The statement outlines tax breaks for eligible companies (Unlisted companies, incorporated during the last 3 years, undertaking an eligible business with expenditure less than $1mill and income less than $200,000 in previous year) that provide a 20% non-refundable tax offset based on the amount of investment capped at $200,000 per investor, per year. The incentives also provide a 10 year CGT exemption for investments held for at least three years.
Changes to company losses tests
The current 'same business test' will be relaxed to allow businesses to access prior year losses even when there have been minor changes to their operations and changes in ownership after losses have been incurred.
The 'predominantly similar business test' will make it easier for companies to access carried forward tax losses where they enter into new business activities and transactions (The current same business can be very difficult to pass and is applied very strictly by the ATO. The 'predominantly similar business test' is intended to apply to losses made in the current and future income years; current tests will continue to apply to existing losses.
Changes to employee share schemes
Proposed changes will limit the disclosure requirements for ESS allow otherwise non-disclosing companies to offer shares to their employees without having to reveal commercially sensitive information to the public.
The reforms also seek to make ESS more user-friendly for innovative companies allowing them to attract motivated staff without a substantial initial outlay.
Recent changes applying to ESS from 1 July 2015 already include specific concessions for start-up companies where certain conditions are met.
Changes to Depreciation rules for intangible assets
Current rules limit depreciation deductions for some intangible assets (such as patents and trademarks) to a statutory life. The proposed rules instead allow business entities to choose for acquired intangible assets to be depreciated over their economic life as occurs for other assets, making to possible to bring forward deductions for some tax payers.
Tax offset for early stage venture capital partnerships – expected to commence 1 July 2016
Proposes a 10% non-refundable tax offset for capital invested in new Early Stage Venture Capital Limited Partnerships (ESVCLPs) as well as relaxing eligibility and investment requirements to allow managers to undertake a broader range of investment activities and greater diversity of investors.
The innovation statement announced a positive change for insolvency and reconstruction practitioners as the reforms introduce a 'safe harbour' for directors from personal liability for insolvent trading if they appoint a professional restructuring adviser to develop a plan to turnaround a company in financial difficulty.
In addition, the default bankruptcy period will be dramatically reduced from 3 years to 1 year,
For full details of the announcement see the links below please refer to http://www.innovation.gov.au/
Or to read the Media release from Scott Morrison - Tax and business incentives to boost economic growth & jobs