Federal government tweaks incentives for startup investors

Kelly O'Dwyer

Kelly O'Dwyer supports criminal penalties for serious exploitation. Source: AAP Image/Mick Tsikas.

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.

“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.”

Read more: A year one report card on Malcolm Turnbull’s Innovation Agenda

“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.

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4 years ago

While you may not like to read this from a fellow Australian Citizen, if you want to build a successful startup – Just Leave and soon. Very sadly our home is the land of the Mushroom. Come back later and invest your riches in AUS.

I have had a great year building a startup offshore (it’s our first birthday today) and we have just made lift off from the runway as well as signed off on Round 2 last week. It will nonetheless be a long haul to thrive, I am sure.

But the key message is this: They Don’t get it in AUS. Too many years of mining bliss and BS. Look at the startup Genome Report and others and just realise this: 17th – SEVENTEENTH IS THE BEST WE CAN DO. You do not even make it into the heats in the swimming at 17th.

So, do you want to swim or drown? Survival is Not Mandatory.