budget impact on innovationEvery state and federal budget promises tax cuts, incentives and other initiatives to stimulate jobs generation and economic growth.

And then there are the usual belt-tightening and “pinch from Peter to pay for Paul” platitudes to fund them.

I’ve made it easier for you to grasp the impact on your innovation and commercialisation plans with this summary of relevant items announced today, noting that there are few initiatives that weren’t announced as part of the National Innovation and Science Agenda (NISA) a few months ago.

Importantly there were no announced changes to the R&D tax incentive program and the improved targeting of the R&D tax incentive towards small business.

However, starting on 1 July 2016, the small business tax rate will drop from 28.5% to 27.5% increasing the effective net after-tax R&D benefit for businesses with a turnover of less than $10 million to 17.5%.


Fintech Sandbox: The government is working with ASIC to provide a ‘regulatory sandbox’ so that start-ups and existing fintech businesses can test their ideas for up to six months with a group of customers in a regulated environment. This will provide start-ups who have limited funds to bypass the complex and expensive financial regulatory process – allowing them to focus on trialling new products.

Changes to the Clean Energy Finance Corporation (CEFC): An adjustment to the CEFC’s investment mandate – $1 billion of the existing funding will be redirected over the next ten years to the Clean Energy Innovation Fund for emerging clean energy technologies.


1. Tax incentives for investors in innovative start-ups, including:

  • A 20% non-refundable tax offset on investment capped at $200,000 per investor, per year.
  • A ten-year capital gains tax exemption for investments held for 12 months or more.

2. Changes to employee share scheme rules which introduced tax concessions for employees of eligible start-up companies and reversed some of the unpopular changes made to the ESS tax laws on 1 July 2009, particularly with respect to options.

3. Changes to Venture Capital Limited Partnerships:

  • Partners in a new Early Stage Venture Capital Limited Partnership (ESVCLP) would receive a 10% non-refundable tax offset on capital invested during the year.
  • The maximum fund size for ESVCLPs would be increased from $100 million to $200 million.
  • ESVCLPs would no longer need to divest a company when its value exceeds $250 million.
  • Eligibility and investment requirements would be relaxed so that managers could undertake a broader range of investment activities and attract a greater diversity of investors.

4. Changing insolvency laws, including:

  • 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 include clauses that allow contracts to be terminated solely due to an insolvency event; unenforceable if a company is undertaking a restructure(‘ipso facto’ clauses).

5. Relaxing the same business test so that losses can be carried forward where there has been a change in ownership.

6. Changing depreciation rules for intangible assets to allow taxpayers to self-assess the tax effective life of acquired intangible assets.

7. Amending the Corporations Act to establish a regulatory framework for crowd-sourced funding by small, unlisted public companies.

8. New funds:

  • $250 million Biomedical Translation Fund.
  • CSIRO Innovation Fund to support commercialising early stage innovations from CSIRO, universities and other publicly funded research bodies.
  • $8 million fund for new and high performing incubators.

You’re welcome to call me or one of our associates to explore how Impact Innovation Group can help you make the most of opportunities created by the 2016-17 federal budget: +61 (0)7 3041 1128.