Innovation is on Australia’s Agenda
On 7 December 2015 the Prime Minister, Malcolm Turnbulll, and the Minister for Industry, Innovation and Science, Christopher Pyne, unveiled the much anticipated National Innovation and Science Agenda. The Australian economy cannot rely on the next commodity price boom for future growth, rather the focus has turned to innovation to drive productivity and competitiveness. This agenda is geared to deliver services to help innovative businesses access capital, help business commercialise great ideas, promote innovation across government, and equip young Australians with skills to succeed in the 21st century so that we might develop an innovative, agile and entrepreneurial economy.
In a practical sense, this agenda is proposing a number of business, funding and accounting initiatives that if implemented will support the development of a more productive and innovative economy. The agenda includes:
- Increasing access to Company losses – reforms propose that the ‘same business test’ will be relaxed permitting businesses to now access prior year losses where they have made minor changes to their operations. The new and more flexible test to be applied will be a ‘predominantly similar business test’. Under this new test companies will be able to enter into new business activities and transactions without facing a tax penalty. The ‘predominantly similar business test’ will apply to losses made in the current and future income years, whilst current tests will continue to apply to existing losses.
- Intangible Asset Depreciation – reforms propose to permit depreciation of acquired intangible assets to be self-assessed over the tax effective life, the same tax treatment for tangible assets. This has the potential to increase depreciation for these assets, decreasing the costs of investing in them and allowing the acquiring company to better commercialise them. These changes are to be applied from 1 July 2016.
- Tax Incentives for Investors – reforms propose a concessional tax treatment for investors who support innovative startups including a 20 per cent non-refundable tax offset based on the amount of their investment, capped at $200,000 per investor per year. A 10 year capital gains tax exemption for investments held for at least 3 years is also to be introduced. The qualifying investments will include companies incorporated during the last 3 years, non ASX listed and have expenditure of less than $1million and income of less than $200,000 in the previous year. The scheme is expected to commence in 2016 with legislation to be introduced.
- Crowd Sourced Equity Funding (CSEF) – reforms propose to allow entrepreneurs to raise up to $5mil per year from a large number of individuals in return for equity in their company with an exemption from the normal reporting and disclosure requirements that apply to public companies for the first 5 years. CSEF will be available to Australian public companies with a turnover and gross assets of less than $5million and investors are limited to a maximum investment of $10,000 per company per year. The new CSEF arrangements are expected to be in place within six months of legislation passing into law.
- Insolvency Law Reform - is proposed to strike a better balance between encouraging entrepeneurship and protecting creditors by reducing the current default bankruptcy period from 3 years to 1 year; introducing a 'safe harbour' to protect directors from personal liability for insolvent trading if they appoint a restructuring adviser, and making contract termination unenforceable due to insolvency if the company is undergoing a restructure. A paper outlining the proposal will be released in 2016, with legislation to be introduced mid 2017.
This innovation agenda reform has the potential to substantially improve the business environment across all industry sectors. Hanrick Curran Advisers will continue to remain abreast of these developments to support our clients to continue to build and develop profitable businesses.
If you would like to attend an information session about the Innovation Agenda in the New Year, please register your interest. For further information, review the government's website www.innovation.gov.au, speak with your usual Hanrick Curran adviser or contact one of our Business Advisory partners, Jamie Towers, John Kotzur, Matthew Beasley, Tony Hunt, Tim Taylor, Peter Maletz and Kim Hanrick.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.