Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 (CTH)
Tuesday 5 April 2016 @ 2.08 p.m. | Legal Research | Taxation
On 16 March 2016, the Hon Scott Morrison MP introduced the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 into the Commonwealth House of Representatives. The bill has been claimed to be focused on "changing the tax laws for startups."
Background to the Bill
According to the Second Reading Speech, the bill "amends our taxation laws to implement a range of new incentives to drive economic growth and jobs in our transitioning economy."
The government anticipates on their website that the incentive will be available for investments in companies that:
- undertake an eligible business (scope to be determined)
- that were incorporated during the last three income years
- aren’t listed on any stock exchange
- have expenditure and income of less than $1 million and $200,000 in the previous income year respectively.
The scheme is based on the successful UK Seed Enterprise Investment Scheme which raised over AUD$500 million in startup investment for almost 2,900 companies in its first two years.
Amendments Contained in the Bill
In short, Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 to provide tax incentives for early stage investors, and especially to encourage new investment in Australian early stage innovation companies with high growth potential by providing investors, who invest in such companies, with a tax offset and a capital gains tax exemption for their investments.
Schedule 2 to this Bill amends the early stage venture capital limited partnership (ESVCLP) and venture capital limited partnership (VCLP) regimes within the Venture Capital Act 2002 and Income Tax Assessment Act 1997 to improve access to venture capital investment and make the regimes more attractive to investors. These changes are intended to encourage and support innovation, risk-taking, and an entrepreneurial culture in Australia.
The amendments provide an additional tax incentive for limited partners in new ESVCLPs, relax restrictions on ESVCLP investments and fund size and clarify the legal framework for venture capital investment in Australia.
The government expects the scheme to commence from 1 July 2016 as soon as amendments receive Royal Assent.
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Sources:
Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 and Secondary materials as reproduced in TimeBase LawOne
