The recent release of the Federal Government's National Innovation and Science Agenda outlines key measures to promote and support the growth of innovation and entrepreneurial ventures in Australia.
The 'Innovation Statement' includes the following proposed tax incentives:
- Early investors in startup companies will be able to receive a 20% non-refundable tax offset on investment, capped at $200,000 per investor per year. Startup companies are defined as unlisted companies incorporated for less than 3 years that operate an "eligible business" (yet to be determined) and have expenditure of less than $1 million and income of less than $200,000 in the previous income years.
- Investors may also be able to access a 10 year capital gains tax exemption for investments held for more than 3 years and less than 10 years. This incentive is aimed at encouraging early stage investment in Australian innovation.
- The 'predominantly similar business test' is proposed to replace the 'same business test' to provide companies with more flexibility when attempting to access tax losses. A company can access tax losses where their business, while not the same, uses similar assets and generates income from similar sources. This will encourage companies to seek out profitability by 'pivoting' their product or business model.
- Intangible assets will be eligible for depreciation deductions for their economic life as opposed to a statutory life by allowing self-assessment of intangible assets (such as patents or trademarks) and faster depreciation of such assets.
The Agenda also proposed the following insolvency law reform to avoid punishing early business failure:
- reduction of the default bankruptcy period from three years to one year;
- introduction of a 'safe harbour' for directors from personal liability for insolvent trading to be available if they appoint a professional restructuring adviser; and
- removal of 'ipso facto' contractual clauses if a company is undertaking a restructure, preventing termination of a contract due to an insolvency event.
Watch this space for more updates in the coming months.
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