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Here are the new tax incentives for Australian entrepreneurs

Photo: Dean Lewins/ Pool/ Getty Images.

The Turnbull government has followed through on plans to offer tax incentives to entrepreneurs and startups, announced during last December’s innovation statement, with treasurer Scott Morrison saying a bill to change the tax laws for startups will be introduced to Parliament on Thursday, the last day before Parliament rises for the 7-week autumn break.

“The Government has been listening carefully to stakeholders during the development of these measures,” Morrison said in a statement announcing the introduction of the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016.

“We have consulted widely with investors, industry bodies, universities and the start-up community to incentivise innovation and reward greater risk taking, while also maintaining the integrity and sustainability of the tax system.”

Here’s what you can expect from the new laws.

Tax incentive for early stage investors

  • This will give concessional tax treatment to investors to promote investment in innovative, high-growth potential start-up companies.
  • It includes a 20% non-refundable carry forward tax offset on investments in qualifying companies, capped at $200,000 per investor per year;
  • And a 10 year exemption on capital gains tax, provided investments are held for 12 months or more.

New arrangements for venture capital limited partnerships

  • This will deliver changes to the tax treatment of early stage venture capital limited partnerships (ESVCLP) to attract more investment into venture capital.
  • Investors will receive a 10% cent non-refundable carry forward tax offset on capital invested through an ESVCLP.
  • The maximum fund size for new and existing ESVCLPs will be increased to $200 million with a number of reforms made to the income tax treatment of venture capital more generally.

As speculation continues that the government will call an early election for July, prime minister Malcolm Turnbull’s signature $1.1 billion innovation and science policy a centrepiece of the government’s re-election pitch, so getting the changes through Parliament before it rises is essential to countering perceptions that the government is not doing enough, quickly enough.

While most welcomed Turnbull’s innovation plan when it was announced late last year, others thought it missed the mark. Perhaps these new incentives will change their minds.

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