As one financial year draws to a close and after businesses have maximised their potential tax concessions for this year, it is never too early to start to focus on what opportunities are available for the year ahead.
A new scheme which may be of interest to many companies are the tax concessions which are available from 1 July 2016 to support new innovation companies.
Amendments to Australia’s tax laws introduced earlier this year means that generous tax incentives are available for eligible investors for the financial year 2016/2017 wishing to invest in qualifying start-ups involved in the innovation sector.
If the start-up business meets certain qualifying criteria then investors can benefit to the following extent:
- a 20% non-refundable carry-forward tax offset (capped at $200,000 per annum per investor); and
- a capital gains exemption for up to 10 years on gains made from shares held in the investment for a minimum period of 12 months.
There are eligibility requirements for investors derived from the Corporations Act 2001, as well as eligibility criteria for the start-up.
The investor must either fall within the definition of a sophisticated investor as defined by the above Act or if not, must limit the extent of their total investments in qualifying companies to $50,000 or less each financial year.
For a start-up to qualify, they must be involved in innovation as determined by the criteria set by the government or have received a determination to that effect from the ATO.
The start-up company must also satisfy the requirement that it is at an early stage of its development as determined by criteria based on its expenditure, income, stock exchange listing and incorporation.
With Australia languishing at 17th in the Global Innovation Index 2015, and with further contractions in the resources sector expected, tax concessions to assist innovative start-ups can only be welcomed.