The government’s recently revealed startup tax incentives could be the “most generous in the world”, StartupAUS CEO Alex McCauley says.
The tax concessions, aimed at encouraging investments in early-stage, high-growth startups, were introduced to Parliament by the government on Thursday.
“This is a huge win for Australian startups,” McCauley tells StartupSmart.
“We’ve been working towards this for a long time, based on the needs of startups around the country to access early stage capital and now we have one of the most generous tax incentives in the world.”
The Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 aims to promote high-growth potential startups by offering concessional tax treatment to investors.
Startups only qualify if they’re under three years old and have expenditure of $1 million or less with assessable income up to $200,000 in the past income year.
Peak advocacy body StartupAUS has been a major player in driving such reforms.
At a special board meeting in 2015, StartupAUS presented a range of recommendations to federal minister for industry, innovation and science Christopher Pyne, with tax incentives to encourage investment in early-stage startups topping their priority list.
“The new tax incentives will allow innovative, high-growth Australian companies to grow and scale locally and the flow-on effects will be substantial,” McCauley says.
By boosting the volume and diversity of seed investment, he says the incentives will create a more sophisticated and experienced pool of Australian angel investors.
“Which will in turn lead to a proliferation of experienced mentors for startups,” he says.
Other leaders in the startup space have also welcomed the bill.
Prominent investor and Shark Tank judge Steve Baxter says it’s a good move for the sector despite it only applying to a narrow band of startups.
“I was very happy with their definition of the companies that qualify, there’s a real problem if they got that wrong,” Baxter tells StartupSmart.
“There was not a very long period from the consultations to the release of the actual legislation so I can see areas they have moved on that were reacted to quite adversely.”
But he says he would’ve liked the bill to be open to a wider range of investors as he believes if people want to support early stage businesses, it shouldn’t matter where the money comes from.
“The fact that it’s not fully open to non-high net worth individuals or non-sophisticated investors, or the 708 provisions of the corporations act effectively is disappointing,” he says.
But the incentives should help to grow the ecosystem, he says.
“I don’t think it’s the most generous in the world but I think it’s a bloody good step to support businesses that are going to be the linchpin of the future,” Baxter says.