The National Innovation and Science Agenda
The Government’s National Innovation and Science Agenda (NISA) encourages innovation and enterprise.
The package promotes commercial risk‑taking and is aimed at encouraging early‑stage investments in innovative Australian companies — such as start‑ups — so they are better able to find the capital and support they need to successfully develop their idea and bring it to market.
The NISA also provides a solid foundation for FinTech businesses to start, grow and achieve global success.
Tax changes for early stage investment
The Government has introduced measures to incentivise investments in eligible early‑stage innovation companies that have high‑growth potential.
- These incentives include a 20 per cent non‑refundable tax offset on investment capped at $200,000 per investor per year; and
- a new 10 year capital gains tax exemption for investments held for 12 months.
These measures are expected to apply from the 2016‑17 financial year.
The Government will ensure that start‑ups involved in FinTech, including in insurance and finance related activities can be eligible investments for the purposes of the venture capital tax concession. This will allow access to the incentives for venture capital investment including those available under the NISA, encouraging investment in FinTech.
Early Stage Venture Capital Limited Partnerships (ESVCLPs) are investment vehicles that provide tax exemptions for those investing in innovative companies at the early and growth stages of a start‑up.
The reforms are expected to commence from 1 July 2016:
- Limited partners in new ESVCLPs will receive a 10 per cent investor tax offset on capital invested during the year.
- The maximum fund size for new and existing ESVCLPs will be increased from $100 million to $200 million.
- ESVCLPs will no longer need to divest a company when its total assets exceed $250 million.
Changes to the venture capital regime will relax eligibility and investment requirements to allow managers to undertake a broader range of investment activities and attract a greater diversity of investors.
The Government will also introduce a new mechanism by which Innovation Australia can issue binding advice in relation to the definition of ineligible activities and other limited powers to clarify eligibility. This would allow Innovation Australia to clarify whether businesses activities are ineligible — removing the legal uncertainty associated with investments for ESVCLPs.
These measures will provide clarification of the eligibility of a range of activities, including for FinTech.
The visa system is a key enabler of Australia’s ability to attract and capitalise on the expertise and ideas of foreign skilled workers, entrepreneurs and innovators, within a global marketplace.
In November 2016, we will introduce a new Entrepreneur Visa, which will target foreign entrepreneurs with innovative ideas and financial backing from a third party. The eligibility criteria will be determined following consultation, with consideration being given to the desirable level of financial backing and how to target entrepreneurs with innovative ideas in specific sectors.
The Entrepreneur Visa will assist in bridging a current gap in Australia’s ability to facilitate the entry of emerging entrepreneurial talent and highly educated individuals in key fields.
Investment in start‑up incubators
Incubators and similar business support organisations help innovative start‑ups rapidly transform their ideas into globally competitive businesses by giving them mentorship, funding, resources, knowledge and access to business networks.
More high‑quality incubators will mean more start‑ups can realise their economic potential.
To support existing incubators and to encourage development of new ones, we’re committing $8 million to an Incubator Support Program, commencing by 1 July 2016, through which we will offer competitive matched funding to:
- support development of new incubators and accelerators in regions or sectors with high innovation potential;
- boost the effectiveness of high performing incubators including support to expand their services; and
- provide access to top quality research and technical talent through secondments of national or international expert advisers.
Global landing pads
Around six per cent of Australian businesses engage in international innovation, while the Oganization for Economic Co‑operation and Development (OECD) average is 18 per cent. Increasing international collaboration will allow Australian businesses to improve their business performance and access international supply chains and the global market.
The Government is investing $36 million over five years in a Global Innovation Strategy to improve Australia’s international innovation and science collaboration, including to support the establishment of five ‘landing pads’ (in Tel Aviv, San Francisco, Shanghai and two other locations).
The landing pads will assist Australian market‑ready start‑ups by providing state‑of‑the‑art shared workspace facilities to enable access to the customers, talent, mentors, and investors who form the innovation ecosystem in those locations.
Insolvency law reforms
Concerns over inadvertent breaches of insolvent trading laws are frequently cited as reasons for early stage (angel) investors’ reluctance to get involved in a start‑up. Our current insolvency laws put too much focus on penalising and stigmatising failures, so we’re making some changes.
To better balance encouraging enterprise with protecting creditors, we’re reforming our insolvency laws by:
- reducing the current default bankruptcy period from three years to one year;
- introducing a ‘safe harbour’ for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company; and
- making ipso facto clauses, which allow contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure.
The changes will encourage Australians to take a risk, leave behind the fear of failure and be more innovative and ambitious. Over time, these changes will help to reduce the stigma associated with business failure.
Investing in science, technology, engineering and mathematics (STEM)
An estimated 75 per cent of jobs in the fastest‑growing industries require workers skilled in science, technology, engineering and mathematics, so ensuring students have the skills to equip them for the workforce of the future is critical.
Starting in 2016–17, the Government is committing $112 million to boost Australians’ ability to navigate the digital economy and equip our future workforce with STEM skills to address challenges ranging from health and medical care to the environment.
While these initiatives give Australia a solid foundation, we cannot stand still while other countries reform. We must be agile and willing to consider new reforms and new priorities.