Startup News & Analysis

Four new things from the 2016 budget that startups need to know

Denham Sadler /

The federal budget contained few new policies or funding for the Australian sector, serving mainly to reaffirm last year’s innovation statement.

According to StartupAUS CEO Alex McCauley, it is a “missed opportunity” for the sector, and should’ve further reinforced the government’s innovation rhetoric into tangible policies.

The main announcements impacting the startup community include a $200,000 cash injection to promote fintechs on the global stage, and a new program to encourage young job seekers to embrace entrepreneurialism.

But Tuesday night’s budget also included some other hidden details that will impact Australian founders, entrepreneurs and investors.

1. The global landing pads have been brought forward

Announced as part of last year’s innovation agenda, the government will be contributing $11 million to establish five startup landing pads around the world.

In a drip feed of announcements, four of these locations have been revealed: Tel Aviv, San Francisco, Shanghai and Berlin.

Included in the 2016 budget is the reveal that two of these landing pads – in Shanghai and Berlin – will be brought forward from 2018-10 to 2016-17 and will be given a further $2.4 million in funding.

“The landing pads will support emerging Australian companies in global innovation hotspots,” the budget reads.

2. The government wants to experiment with blockchain

The budget saw an especial focus on fintech, with $200,000 contributed to promote local startups on a global level.

It also further outlined how the government wants to embrace the blockchain and explore its potential.

The Treasury and Data61 will perform a detailed study over the next nine months in order to “fully examine the far-reaching potential and implications for both government and industry of the adoption of blockchain technology”.

This study will look at the trends in blockchain update and the practical uses for the technology that could be piloted in government services and the private sector.

3. The startup tax incentives will be available to non-sophisticated investors

The government revealed a series tax incentives to encourage investments to chip into early-stage companies in the innovation statement, including a 20% tax offset on investments in eligible “innovation companies” and a 10-year exemption from the capital gains tax.

The only change to the incentives in this year’s budget that hasn’t been previously announced is that they will also be on offer to “non-sophisticated investors” who chip money into startups.

But the incentives will be capped at investments of $50,000 or less per income year for these everyday investors.

The budget also served to confirm a series of slight alterations to these tax incentives, which were introduced to parliament in March.

The holding period for investments to access the capital gains tax exemption has been reduced from three years to 12 months, while eligible companies will now have a time limit on incorporation and set criteria for determining if they are an “innovation company”.

“These amendments have been determined in close consultation with stakeholders and will better target the incentives to ensure they promote investment in early-stage innovation companies,” the budget says.

“These companies face difficulty attracting the capital and business expertise needed to succeed.”

To access these concessions, angel investors must not be affiliated with the startup however.

4. The changes to ESVCLPs will be back-dated

In changes flagged earlier this year, the maximum size for an Early Stage Venture Capital Limited Partnership has been doubled from $100 million to $200 million, with the changes also available for existing funds.

These incentives will also be available to conditionally registered funds that become unconditionally registered after December 2015.

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Denham Sadler

Denham Sadler is a former editor of StartupSmart. He was previously a journalist at the publication and has worked as a freelancer for the Guardian, the Saturday Paper and the ABC. In his spare time he likes puns and jaffles.

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