2nd February, 2016
Are you a small business owner or entrepreneur planning a new venture in 2016? It’s worth investigating the range of government assistance on offer before you charge headlong into your startup.
Government red tape is often seen as a brake on small business, but there is also a wide range of tax breaks and financing designed to assist new business ventures and help them in their formative phase.
Last year the Federal Government announced a $1.1 billion incentive scheme for new startup businesses, and entrepreneurs with startup plans won’t want to miss out on what’s on offer in 2016.
In addition to those incentives, it is estimated that governments at all levels have 415 business assistance programs with another $35.5 million in funding available across a range of programs.
Before you go and take out another mortgage on the house, sell the family silver or pitch your idea to family and friends, it’s worth knowing if the taxes you pay could actually come back to you by assisting your new business idea.
The incentive package focuses on grants for the science and the digital economy, but there are also more general measures such as tax offsets and rules around crowd funding which will apply to everyone.
For example, individuals can now claim a tax offset of 20 percent on investments they make in startup companies which are less than three years old, are not listed on the sharemarket and have income of less than $200,000 per year.
The offset is capped at $200,000. This effectively means that if you invested $1 million in your startup, you could claim $200,000 of that back.
There are also changes to the capital gains tax regime, with an exemption for investments held for up to three years.
If you have family, friends and investors lined up and willing to sink their funds into your idea, it is worthwhile telling them about the tax breaks for venture capital.
Investment in startups is often made through Early Stage Venture Capital Limited Partnerships (ESVCLP), and investors in these vehicles will receive a 10 percent non-refundable tax offset on any startup investments.
The Government has also eased its rules around what constitutes Research and Development (R&D), making it easier to write off expenses as R&D costs when you change your business strategy.
A lot of startup businesses change direction as they evolve, but under the old “same business test” R&D costs couldn’t be claimed if the business model changed.
All entrepreneurs know there is a high failure rate with business ideas.
Just because some ideas fail doesn’t mean the next one won’t succeed, or that business people whose ideas have failed are bad at business.
With that in mind, the Government has changed the rules to allow businesses to trade while insolvent, as long as an adviser is engaged to investigate a restructuring plan.
The stigma of bankruptcy will also be lightened, with the period in which bankrupts are presented from running new businesses cut down to one year from three previously.
As the innovation statement says, “sometimes entrepreneurs will fail several times before they succeed and will usually learn more from failure than success”.
The Government says it wants an “ideas boom” to flow from the package.
For those entrepreneurs planning startups in 2016, the boom can begin with accessing some of the new incentives on offer.
And if you’ve got a startup which is even remotely connected to science, call the CSIRO. They’ve just got a new $200 million fund to invest in startups.
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