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Start-ups targeted for support

Start-ups targeted for support

Start-up businesses have been targeted for a high level of support in the PM’s Innovation statement, with major changes to tax regulations relating to investment in new businesses.

The National Innovation and Science Agenda (NISA) is Prime Minister Malcolm Turnbull’s first major economic policy launch since ousting Tony Abbott. It pledges an additional $1.1 billion of government spending over the next four years to foster investment in science and new technology.

Turnbull – a key player in Australian internet pioneer OzEmail in the 1990s – is well known for his support for the start-up sector.

Yesterday’s announcement follows on from the release of a report by the Australian Advanced Manufacturing Council (AAMC) on Sunday calling for a raft of changes to how Australia encourages and retains innovative businesses.

Both the report and the government Innovation statement highlight the success of the UK Seed Enterprise Investment Scheme, which has attracted more than AUD$500 million in its first two years of operation, money that has been invested in some 2900 companies.

The Australian scheme, which the government intends to launch in 2016, will offer a 20% tax refund on investments up to $200,000 per investor, per year, and a 10-year capital gains exemption on investments held for three years.

The AAMC report, How Australia Compares, examined the international competitiveness of taxation systems in encouraging investment capital, finding Australia ranked 10th out of the 12 nations compared. The report claims the existing R&D-based incentives have been outstripped by the incentives offered by international competitors.

AAMC chairman John Pollaers said: “This is an area of increasing competition internationally. As the report shows, our R&D tax credits are competitive.  But this is not giving us the edge. If we rest solely on our R&D scheme, we will get left further and further behind.”

In launching the new policy, Mr Turnbull asked, “What is going to drive Australian prosperity in the years ahead?” Where the mining boom that has supported the Australian economy in the recent past was tied to external demand, “our innovation agenda is going to help create the modern, dynamic 21st century economy Australia needs”, providing the foundation for a new type of economy.

While the government and the AAMC report each agree on the creation of a Seed Enterprise Investment Scheme-type fund, the report calls for more far-reaching reforms to the tax system, including reducing corporate tax on profits from Australian-generated IP to 10%.

The tax breaks for start-up businesses are among 24 new policy measures included in the Innovation statement; these aim to increase connections between businesses, scientific institutions such as CSIRO, and universities, as well funding to encourage high school students in STEM (science, technology, engineering and mathematics) subjects.

– Adrian Regan