FUNDING INCENTIVES FOR START-UP BUSINESSES

Optima Partners are fortunate enough to assist and work with a number of start up businesses, including a number of businesses in the innovation and technology sector. We are aware of the huge challenges these businesses face. The directors and owners are usually overworked and underfunded, often using all of their own personal cash and resources to get their business off the ground. The government has recently taken some huge steps in making funding more accessible for these business and in addition making it much more attractive for investors to put money into backing these innovators. The proposed initiative works as follows:

• Investors are able to access a 20% non-refundable tax offset on funds invested, capped at $200,000 per investor
• Investors will be exempt from capital gains tax for 10 years provided they are invested in the company for a minimum of 3 years

The incentive will be available for investments in companies that undertake an eligible business (scope still to be determined), were incorporated in the last 3 income years, are unlisted and have less than $200,000 revenue and $1m in expenditure in the previous income year.

So what does this mean for investors?

Well for an investor that contributes the maximum $200,000 into one of these eligible businesses they will get a 20% tax offset, reducing tax payable in that income year by $40,000. This is a really attractive tax planning opportunity for investors.

Going forward the business may grow and the opportunity may arise to sell the shares, or the company is taken over or lists on the ASX. This transaction may be exempt from capital gains tax if the conditions are satisfied.

When’s it happening?

The scheme is expected to commence from 1 July 2016 as soon as amendments receive Royal Assent.

Phil Carulli

DIRECTOR – OPTIMA PARTNERS