I recently spent a day at a seminar entitled ‘Tax, Innovation and Ideas Boom’, hosted by the Tax Institute. Bit of a strange title but basically encompassed the current Government’s plans as to how they are trying to assist the business and economy to grow. I see this as great news, because generally governments are about raising income from increasing taxes, creating disincentives for businesses to work harder, employ more people and grow. So initiatives aimed at providing incentives for people to take the risk of starting a business are really positive. The Government’s reasoning is that more successful business, employing more people creates a growing tax basis, ie more tax from more taxpayers.
The Australian Economy is well into a shift from its traditional base of agriculture and resources. The resources boom was fantastic for our country but is over; hence our economy’s growth is now coming from technology, science and professional services.
What the government is doing to help innovation:-
Funding:-
- Providing concessional tax treatment for investors who support innovative start-ups by way of a 20% non-refundable tax offset on investments up to $200,000 per year.
- A 10 year capital gains exemption for investments held for 12 months or more.
- New incentives for venture capital limited partnerships.
- Opening up crowd source equity funding, making capital raising easier.
Tax:-
- Relax the carry forward loss rules to make it easier for losses to be utilised when they have not satisfied ‘same business testing’ rules.
- Allow self assessment of the tax effective life of certain intangible assets such as patents and copyrights which will potentially allow faster write-offs.
- Further support the existing Research and Development tax incentive.
- Potential reduction to corporate tax rates.
Other:-
- Improving insolvency laws, making the insolvency process quicker and diminishing the stigma and penalties suffered by those willing to take the risks of ‘start ups and innovation’.
- An incubator support programme.
- Reforming employee share schemes assisting employees to gain from successes.
- Establish Innovation and Science Australia to build government, business and community relationships.
- ‘Landing Pads’ to help entrepreneurs reach global markets and connect to wider networks.
- Regulatory sand box scheme to allow financial and technology start-ups to test products without extensive regulatory application.
I become very frustrated when I hear politicians wanting to tax businesses more, proposing regulation which has the impact of stifling growth. We need positive action to improve business profitability and competitiveness, particularly in international markets, this is what drives growth. With an impending election I encourage everyone to support those politicians or parties who are the advocates for helping businesses thrive in our economy, for that is what will increase income to support necessary spending in our economy.
Written by Peter Cousins – Director of Casey Partners.