ARDR-external comment: Mark Molesworth, BDO
Heading the right direction
The Australian Government's Innovation Statement indicates an intention to make a real difference to Australia's innovators.
In a previous commentary and prior to the release of the government's Innovation Statement, BDO's Nicola Purser warned that the government's new agenda may miss important insights from the business sector.
In the follow-up commentary below, BDO's Mark Molesworth is now analysing what the National Science and Innovation agenda will mean for Australia's innovative enterprises.
“BDO welcomes the Federal Government’s Innovation Statement announced today as it indicates an intention to make a real difference to the creators of future value in Australia.
“While it will be necessary to understand the detail of the Government’s tax focussed proposals, a number of key points standout.
“The replacement of the same business test that applies to allow companies to carry forward losses once their ownership changes by 50 per cent or more is a welcome change. This change will have ramifications beyond the innovation sector.
“A ‘substantially similar business’ test is more reflective of the reality of modern business and will assist companies raise capital more easily and at better valuations.
“Changing the employee share scheme rules to make them more ‘user friendly’ for innovative businesses could increase the take-up of these arrangements. The recent changes for start-up companies were a very welcome change and were championed by the current Prime Minister.
“If these rules are made even easier to deal with, Australian companies’ ability to attract talent will only increase — perhaps stemming the brain drain.
“The proposed 20 per cent offset for investment in very small companies, and the 10 year capital gains tax exemption once the investment has been held for at least three years, will fundamentally change the return on investment calculations for small investors looking to support Australian innovation.
“Any liberalisation of the rules around venture capital limited partnerships is welcome. In our experience, these provisions have been so restrictive as to have been almost unused by our clients.
“However, the Federal Government appears to have restricted its incentives to unlisted start-ups. In our experience, there are many highly innovative companies searching for investment capital for whom these incentives would be equally beneficial and, in some cases, even more beneficial.
“We are eager to see the outcome of the Government’s review of the R&D tax incentive.
“We are glad the Government heeded our warning; announcing changes to it today, before the review panel had a chance to consider all submissions and report back, would be premature.”