The Senate has passed startup tax break laws

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The Senate has passed new laws which will make investing in Australian startups more attractive from 1 July.

Minister for Industry, Innovation and Science Christopher Pyne said the measures would help grow startups and enable global success.

“These tax measures are designed to broaden and diversify the economy through economic policies that build growth and productivity,” Mr Pyne said.

“The Tax Incentive for Early Stage Investors and New Arrangements for Venture Capital Limited Partnerships will promote investment in innovative high-growth potential startup companies and improve businesses’ access to venture capital.

The new laws are split into two main sections:

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.

“Over 4,500 startups are missing out on equity finance each year. These measures will help startups get access to crucial funding to grow their startup,” Pyne said.

“Investors, venture capital funds and innovative companies in all industries will benefit from these measures.”

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