Federal Government Releases Innovation Statement
The Federal government recently released its innovation statement with respect to the new National Innovation and Science Agenda. Through this program, the government will dedicate $1.1 billion in a bid to encourage and enable innovation and entrepreneurship and to promote science, maths and computing in schools.
Among the key points of the innovation statement are:
Tax incentives for investors
To encourage investors to direct funds towards innovative start-ups, the government has introduced the following concessional tax treatments:
- A 20% non-refundable tax offset on investment capped at $200,000 per investor, per year.
- A 10 year capital gains tax exemption for investments held for at least three years.
The incentive will be available for investments in companies that:
- Undertake an eligible business activity (scope to be determined)
- Were incorporated during the last three income years
- Aren’t listed on any stock exchange
- Have expenditure of less than $1 million and income of less than $200,000 in the previous income year.
Business Research and Innovation Initiative
The Business Research and Innovation Initiative allocates funding for the development of new products and innovations.
It will operate in three stages:
- A collaboration with Innovation and Science Australia to nominate five national policy and service delivery challenges.
- Businesses will be invited to submit proposals to address those challenges and the winners will receive grants of up to $100,000 to test their ideas over three to six months of development
- The most successful ideas may be eligible for a further grant of up to $1 million to develop a prototype or proof of concept over the following 18 months.
The Business Research and Innovation Initiative will launch on 1 July 2016.
The aim of the Digital Marketplace is to give SMEs and startups improved access to win contracts for the $5 billion a year the government spends on IT.
The Digital Marketplace will:
- Break down large scale ICT requirements into individual components to allow for greater scope for innovation solutions
- Make it easier for business suppliers of ICT software and hardware join the directory.
- Make it easier for government buyers to identify and procure service providers and suppliers.
A prototype version will be available in 2016.
Increasing access to company losses
The ability to offset losses against other profits is particularly important for small companies, and to encourage these businesses to continue innovating, the government will allow more access to company losses.
This will be done in the following ways:
- The current ‘same business test’ will be relaxed to allow businesses to access prior year losses when they have entered into new transactions or business activities.
- A new and more flexible ‘predominantly similar business test’ will be introduced.
Reform to insolvency laws
In an effort to encourage entrepreneurship among Australians, insolvency laws will be reforms to be more lenient in terms of penalisation.
- 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.
Intangible asset depreciation
Intangible assets, such as patents and copyrights, have an inferior depreciation benefit and are more costly to invest in when compared to their tangible counterparts.
To mitigate this issue, the following changes will be introduced:
- A new option to self-assess the tax effective life of acquired intangible assets.
- The option to continue using the existing statutory effective life of the asset.
If you would like to learn more about the innovation statement, please do not hesitate to call us on (03) 9555 3551 or email us via [email protected].