1. Tax incentives for investors
The incentives described by the Prime Minister in his announcement are aimed at "very early stage investors" in certain companies:
1. Being in an "innovative industry" or "innovative sector";
2. Having been incorporated in the last 3 years;
3. Not listed on any stock exchange;
4. With expenditure of less than $1 million; AND
5. Income of less than $200,000.
If all 5 criteria are satisfied, the tax incentive offered is a 20% income tax offset on your total investment of up to $1m. For example, If you were to invest $1 million, then 20% ie. $200,000 would be offset against your income in your tax return. In addition to this, if the investment is then held for 3 years or longer, the capital gain that arises on the sale of the investment would be exempt from capital gains tax if sold within 10 years.
The scheme is expected to commence from 1 July 2016 as soon as amendments receive Royal Assent.
Further information and a specific fact sheet regarding 'Tax incentives for investors' can be found at the following link: http://www.innovation.gov.au/page/tax-incentives-investors
2. Access to crowd-sourced equity funding
Proposed legislation will allow greater access to crowd-sourced equity funding (CSEF) for public companies with a turnover and gross assets of less than $5 million. This will in turn allow entrepreneurs to raise up to $5 million per year from individuals who will receive a portion of equity in return.
Legislation to implement CSEF was introduced into Parliament on 3 December 2015. The CSEF scheme will commence within six months of the legislation receiving Royal Assent. Draft regulations setting out the details of the scheme will shortly be released.
Further information and a specific fact sheet regarding 'Access to crowd-sourced equity funding' can be found at the following link: http://www.innovation.gov.au/page/access-crowd-sourced-equity-funding
3. Increasing access to company losses
Under current legislation, companies making consistent losses who bring on new equity contributors would have their past losses denied due to the 'same business test', which prevents companies from making use of their losses due to the majority of ownership having changed hands.
However, the proposed legislation encourages companies to diversify in order to obtain profitable results. The proposed 'predominantly similar business test' would allow companies greater flexibility in finding new income streams. The company would still have to make use of the same assets, generate the majority of its income from the same business and take advantage of opportunities a similarly placed business would take advantage of.
The 'predominantly similar business test' will apply to losses made in the current and future income years.
Further information and a specific fact sheet regarding 'Increasing access to company losses' can be found at the following link: http://www.innovation.gov.au/page/increasing-access-company-losses
4. Intangible asset depreciation
Under current legislation, companies are required to amortise their intangible assets under pre-prescribed statutory rates.
However, proposed legislation will allow companies the option to self-assess the effective life of their intangible assets such as patents or copyrights to better align with the actual number of years the asset provides an economic benefit. Companies will also be allowed to follow the existing statutory rates.
The changes will apply to assets acquired from 1 July 2016.
Further information and a specific fact sheet regarding 'Intangible asset depreciation' can be found at the following link: http://www.innovation.gov.au/page/intangible-asset-depreciation
5. Insolvency laws reform
Proposed legislation changes to the insolvency laws will enable entrepreneurs to make small mistakes without having to completely relinquish their business opportunity, whilst also protecting the creditors involved. The three proposed changes are as follows:
- reducing the current default bankruptcy period from three years to one year
- introducing a 'safe harbour' for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company
- making 'ipso facto' clauses, which allow contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure.
A proposal paper will be released in the first half of 2016. Legislation is expected to be introduced and passed in mid-2017.
Further information and a specific fact sheet regarding 'Insolvency laws reform' can be found at the following link: http://www.innovation.gov.au/page/insolvency-laws-reform
Please contact us if you would like to discuss any of these initiatives.