Matthew Canavan (Queensland, Liberal National Party) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

TAX LAWS AMENDMENT (TAX INCENTIVES FOR INNOVATION) BILL 2016

I am proud to introduce this Bill which amends our taxation laws to implement a range of incentives to drive economic growth and jobs in our transitioning economy.

These measures shall help encourage innovation, risk taking and an entrepreneurial culture in Australia.

These measures comprise the heart of the Government's National Innovation and Science Agenda, and represents its commitment to making Australia a more modern, dynamic, 21st century economy.

These actions also go towards ensuring Australia remains a world leader when it comes to doing business.

The Government is investing $1.1 billion to incentivise innovation and entrepreneurship.

This Bill delivers upon two commitments: providing concessional tax treatment to investment in innovative,

high-growth startups; and reforms to the arrangements for venture capital limited partnerships to improve access to capital, and make the regime more user-friendly and more internationally competitive.

The first measure, Schedule 1 to this Bill, amends the Income Tax Assessment Act 1997 to improve investment into early stage innovation companies through incentivising investors with business expertise and experience to assist entrepreneurs with commercialising their concepts and ideas.

The second measure, Schedule 2 to this Bill, will amend the Venture Capital Act 2002 andthe Income Tax Assessment Act 1997 to reform the arrangements for venture capital investments, which is expected to attract greater levels of investments at the growth stage of developing a concept, while improving the international competitiveness of investing in entrepreneurs at this stage of the financing life-cycle.

This Bill is an important step for Australia – investors, venture capital funds and innovation companies in all industries will benefit from these measures.

These measures have specifically been designed to foster a shift towards a culture of innovation, whereby entrepreneurial risk-taking is encouraged and rewarded.

The Tax Incentives for Early Stage Investors measure aims to support early stage investment by encouraging more businesses to develop innovative ideas.

Within the early stages of an innovation company's financing life-cycle, difficulty attracting funding can prevent entrepreneurs from developing and commercialising their ideas. In fact, this stage is sometimes described as the 'valley of death' where many startups find themselves unable to meet their cash flow requirements. It is important that the Government helps connect business expertise with entrepreneurs so that innovative ideas can reach the market through commercialisation.

The tax incentives include a 20 per cent carry-forward non-refundable offset on investments capped at $200,000 per year, and a 10 year exemption on capital gains tax for investments held in the form of shares in the innovation company for at least 12 months, provided that the shares held do not constitute more than a 30 per cent interest in the innovation company. The tax offset will be available upon investment, not when the funds are used by the innovation company, and any sale of the shares will be taxed on a 'deemed capital account' basis.

Innovation in Australia is dynamic. A regulation making power is also included so the Government can keep the measure up to date.

The tax incentives for funding provided through venture capital limited partnerships including early stage venture capital limited partnerships are designed to attract investments at the growth stage of a company's development. At this stage, entrepreneurs can face further difficulties accessing funding, despite typically receiving a few rounds of initial funding, as they are not yet able to market themselves for public or broader investor buy-in. Although Australia has experienced recent momentum in this field, with over $600 million in venture capital raised or planned since 30 June 2015, this funding has been generally concentrated within the technology sector. The measure will continue to build on the current momentum through improving funding for promising projects across the economy and in industries beyond the technology sector.

We are introducing a number of new arrangements to venture capital limited partnerships and early stage venture capital limited partnerships. Notably, there will be

Once the Bill receives Royal Assent, these incentives will apply to the 2016-17 income year.

Consultation has been conducted across a range of sectors and industries, including experienced investors, startup founders and industry bodies, to design these measures in a way that attracts investment without creating unnecessary regulatory burdens on either the Government or entrepreneurs.

We are answering the call from industry. We are creating the ecosystem that Australia needs to succeed in this modern world.

We are setting up the environment to reward our innovators and our entrepreneurs who have the concepts and ideas to benefit all Australians.

Backing innovation to drive productivity is part of the Turnbull Government's economic plan to successfully manage our transition. The Turnbull Government knows that our transitioning economy requires increased investment and we will build the conditions necessary for that investment.

This is another practical example of how the Turnbull Government is acting to support the positive transition that is taking place in our economy.