On 16 March I published a post on the new Innovation Tax Incentives Bill and promised to come back with more analysis. Our friends at BDO have done such an analysis and have concluded that while the legislation provides further incentive for investment in innovative start-ups, some of the eligibility requirements are overly restrictive and time consuming for start-ups to comply with.
Suffice it to say that the Bill is pretty complex, in terms of figuring out if a startup is an eligible company, with a points based formula, the possibility of rulings and with further rules able to be set by regulation. The investor eligibility rules are pretty complicated as well.
What is clear is both retail and sophisticated investors can benefit from the tax breaks on offer… but not equally… and investors investing too close to home (including founders) are not eligible.
Government is under a fair amount of pressure from industry to get these changes in place for the tax incentive to be operational by 1 July 2016 and despite some of the complexities it may be politically difficult for Labor or the Greens to delay its passage. Having said that the political landscape in Canberra right now is a little complicated and innovation may be at risk of taking a backseat to some other issues so fingers crossed the Bill is passed into law soon. In the circumstances I think it would be fair to expect the Bill to pass into law without many amendments.
Now Techboard understands from sources that have been in direct discussion with Government officials in recent weeks that unsurprisingly the Tax Office has no great desire to have investee company eligibility routinely determined by ruling, so I suspect that the regulations once issued may make it easier to determine these eligibility issues.
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For more information please contact Marc Loftus, Partner Tax (Perth), who is also one of our Panel of Expert Members, or your tax adviser.
To read BDO’s full analysis click here
Peter van Bruchem
Chief Startup Evangelist