The federal government has amended its tax incentives for startup investors to address a technical issue that could have disadvantaged those wanting to invest via an interposed trust.
The Treasury Laws Amendment (2017 Measures No.1) Bill 2017 passed through both houses on Monday. The legislation amends the government’s startup tax incentives, which were included in its innovation agenda and came into effect in July 2016.
The startup tax incentives granted early stage investors and those using Early Stage Venture Capital Limited Partnerships access to capital gains tax concessions, however, the amendment was needed to ensure those investing via an interposed trust have access to the same concessions.
According to BDO tax partner Mark Molesworth, the amendment cleans up “a small technical issue” with the 10-year capital gains tax exemption included in the initial legislation.
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“If that capital gains tax exemption had been earned by a unit trust, then it was likely when that exempt gain was paid out to unit holders, there would be a taxation consequence to those unit holders,” he told nestegg.com.au.
“So what the legislation … did was to make sure there was no taxation consequence for those unit holders.”
“We have amended the income tax law to ensure that two National Innovation and Science Agenda (NISA) measures now deliver more support to innovative Australian companies and more certainty for their investor,” said Kelly O’Dwyer, minister for revenue and financial services, in a statement.
“This legislation provides certainty for investors who are looking to invest in startups and certain venture capital arrangements through an interposed trust.”
The new legislation also aims to simplify the process for the Australian Taxation Office (ATO) to share confidential information with the Australian Securities and Investments Commission (ASIC), similar to sharing arrangements between ASIC and the Reserve Bank of Australia.
“Simpler and more efficient information sharing arrangements will benefit Australian taxpayers by enabling better monitoring by ASIC and the ATO of illegal activities and strengthening tax compliance by companies and individuals,” O’Dwyer says.