On 4th May the government’s Tax Incentives for Early Stage Investors passed the Senate and is now confirmed to start on 1 July.
There is a lot of buzz in the Australian tech sector around the tax incentives for early stage investors. Overall the incentives are met with a warm reception – with some seeing this as proof that the government is finally throwing its support behind our tech scene which has traditionally lagged behind the more established regions like San Francisco, Austin and Israel. Others, however, have criticised its requirements which can potentially lock out companies still regarded by many as fitting the profile of a “typical” startup. Furthermore, an unintended consequence has been created a temporary investor drought due to its start date of 1 July 2016.
With the laws now confirmed by Senate and due to come into effect from 1 July 2016, we now begin a series of blogs focused on this topic. We explore the pros and cons and give insight on how to make the most out of it regardless of whether you’re a startup or an investor. In part one of our series, we give you an overview of the concessions.
As part of the National Innovation and Science Agenda, the Turnbull government released draft laws proposing tax incentives for investors who make eligible investments into “Early Stage Innovation Companies” (ESIC). The measures will apply from 1 July 2016. Whilst not yet formalised as law, the current expectation is the measures will be formalised largely intact.
The incentives are a powerful tool for startups and entrepreneurial companies in attracting investment from seed and angel investors. They provide investors with:
There is an extensive list of requirements which must all be satisfied:
BLOG: How can a company satisfy the meaning of an “Early Stage Innovation Company”
BLOG: How does the Capital Gains Tax exemptions work – some practical examples
BLOG: How does a discretionary family trust make best use of the concession?