As part of the Federal Government’s focus on culture and capital in its recent release of the National Innovation and Science Agenda, some of the changes proposed include:

  • Early investors in innovative startup companies will be able to receive a 20% non-refundable tax offset. Investors may also be able to access a capital gains tax exemption for investments held for more than 3 years. These incentives are aimed at incentivising investment in Australian innovation and will help provide entrepreneurial projects with a head start. 
  • Investments in new Early Stage Venture Capital Limited Partnerships will received a 10% non-refundable tax offset capped at the first $2 million invested, an increase from the current $1 million cap.
  • To provide companies with more flexibility when attempting to access tax losses, the ‘predominantly similar business test’ will replace the ‘same business test’. Meaning the business a company conducts need only be similar in nature, rather than exactly the same. This will encourage companies to expand their horizons and seek out profitability by ‘pivoting’ their product or business model.
  • Some intangible assets will be eligible for depreciation deductions for their economic life as opposed to a statutory life. This will allow self-assessment of the value of intangible assets (such as patents or trademarks) and faster depreciation of such assets. Companies may be able to recoup losses they would have incurred due to the dramatic decreases in the value of such intangible assets by accessing depreciation deductions.

The Agenda also proposed altering insolvency laws to avoid punishing business failure in the following ways:

  • The default bankruptcy period is being changed from three years to one year;
  • A ‘safe harbour’ for directors from personal liability for insolvent trading will be available if they appoint a professional restructuring adviser; and
  • ‘ipso facto’ contractual clauses will be banned, preventing an agreement from being ended on the basis of a company becoming insolvent.

These initiatives aim to encourage risk taking and to remove the fear and consequences of failure.

Watch this space for more updates in the coming months.

Ashleigh Wall
Special Counsel
Harwood Andrews
T: 03 5226 8559

Laura van Stekelenburg
Harwood Andrews
T: 03 5225 5205