National Innovation and Science Agenda measures expanded

Changes in the Federal Budget

Our previous edition of Kinsella TaxWise Business News noted the Government’s National Innovation and Science Agenda (NISA) that was announced in December 2015. A number of tax-related measures were introduced as part of the NISA. In the 2016-17 Federal Budget a couple of these measures have been expanded on.

Expanding tax incentives for early stage investors

As part of the Federal Budget announcement:

  • the holding period will be reduced from three years to 12 months for investors to access the 10 year CGT tax exemption;
  • the definition of eligible start-ups will include a time limit on incorporation and criteria for determining if the start-up is an ‘innovation company’;
  • there will be a requirement that the investor and innovation company are non-affiliates; and
  • the investment amount for non-sophisticated investors will be limited to $50,000 or less per income year in order to receive a tax offset.

Expanding the new arrangements for venture capital limited partnerships

As part of the Federal Budget announcement, the funding arrangements to attract more venture capital investment will be expanded to improve access to capital and make the regimes more user-friendly.

New legislation

As part of NISA, the Government has developed draft legislation on the following two tax measures:

Intangible asset depreciation

The draft legislation contains a measure that will allow taxpayers the choice to either self-assess the effective life of certain intangible depreciating assets or use the statutory effective life. The current law only provides an effective life set by statute.

Increasing access to company losses

The draft legislation contains a measure that will allow businesses that have changed their ownership to access past year tax losses if they satisfy a ‘similar business’ test. Under the current law, businesses that have changed ownership must satisfy the ‘same business’ test to access past year tax losses.

Note! The draft law for these measures was released in April. Though the intangible asset depreciation measure is intended to apply from 1 July 2016 and the losses measure is intended to start from 1 July 2015, as neither has been submitted before parliament and the Government is in caretaker mode due to the impending Federal election on 2 July, there is unlikely to be much progress on these measures at this stage.

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