Forget the Budget and looming federal election, Australia’s biggest news was the Senate’s unequivocal support for Innovation. It was an impressive day in politics with all sides (in both Lower and Upper Houses) supporting and passing a Bill which creates generous tax incentives for innovation investment.
The Bill as part of the Government’s National Innovation and Science Agenda is based on the UK Seed Enterprise Investment Scheme. It is expected to facilitate seed investment in some 4,500 startups, and help Australia become a world leader in innovation.
External investment in startups has traditionally been in the realm of angel investors, or early stage venture capital funds. The Minister for Industry, Innovation and Science Christopher Pyne said “The Tax Incentive for Early Stage Investors and New Arrangements for Venture Capital Limited Partnerships will promote investment in innovative high-growth potential start-up companies and improve businesses’ access to venture capital.”
The generous incentives include a 10yr capital gains tax exemption, and a 20% non-refundable tax offset for investments in qualifying innovative start-ups. The Tax offset is capped at $10,000 p.a for mums and dads, but allows qualified sophisticated investors to claim up to $200,000 p.a. The Bill also specifies that mum and dad investors have an annual investment cap of $50,000 p.a, but sophisticated investors can invest well above this. The Tax incentives start 1 July 2016.
Peta Tilse is a wealth advisor and ABC Radio finance commentator who founded Sophisticated Access said that “this is a shot in the arm for innovation”.
“We are obviously close to the startup scene in creating Australia’s online sophisticated investor registry- Cygura.”
Tilse believes Cygura will be an integral part in the process as investors will want to access the tax offset, and innovators will be required to maintain a registry. She explains that in order to qualify as a sophisticated investor and claim the higher tax offset, and investor is required to hold a valid sophisticated investor certificate. This is created by a qualified accountant certifying the investor as either earning over $250,000 p.a of gross income in the last 2 years, or has $2.5m of net assets. Cygura allows sophisticated investors to create these certificates with their accountant, and share it with those needing to maintain a registry – such as these start-ups. This can be done from any computer or device, and standard access is completely free.
Tilse says that high net worth clients usually have tax planning meetings with their accountants and advisors at this time of year. The current environment of low interest rates, stockmarket volatility, and a heated property market present problems for clients looking to maintain growth, income and diversification in their investment portfolios. Some look to other assets (or alternative investments) that have growth potential, and investments in innovation might be considered in this way. The tax benefits might make these higher risk investments seem more attractive.
To find out more about investing in innovation, or to create your sophisticated investor certificate free – visit www.cygura.com.au