The Federal Government has announced its plan to spend almost $1.1 billion over the next four years as part of a new “innovation package”. The package aims to promote a significant increase in business-based development and growth Australia-wide.
Industry Minister Christopher Pyne has stated that the bulk of the innovation package will come into effect from July 2016. The most relevant initiatives for existing businesses, investors and start-ups are identified below.
Bankruptcy and Insolvency
- The period of bankruptcy will be reduced from three years to one year.
- Insolvency laws will be wound back in recognition of the fact that most entrepreneurs fail several times before they succeed.
- Companies in difficulty will be able to call a business adviser to help restructure their business, without being subject to insolvency laws.
- Existing contracts will remain in place when a company goes into voluntary administration.
- Company directors will not be personally liable for insolvent trading if they appoint a restructuring adviser.
Early stage investors in new start-up businesses will get:
- a non-refundable tax offset equivalent to 20% of the value of invested capital (capped at $200,000 a year); and
- zero capital gains tax if the investment is held for more than three years.
For example, if an investor invests $200,000 and claims the offset, they will reduce their taxable income by $40,000. If the investor sells his or her shares three years later, the initial $200,000 will be exempt from capital gains tax.
The government will also provide funding to help Australian entrepreneurs travel to booming technology hubs like Silicon Valley and Tel Aviv.
The ‘innovation package’ is likely to have a significantly positive impact on business development and growth in Australia.
However, there are concerns about the changes to bankruptcy and insolvency laws. Banks are assessing the impact of the reforms on credit ratings. There is a risk that banks will be more wary of lending to businesses for fear of entrepreneurs avoiding liability with the new insolvency reforms.