Australia plans to spend A$1.1bn (£530m) to unleash an “ideas boom”, which the government hopes will steer the economy away from its dependence on mining and towards entrepreneurial businesses.
A new entrepreneur visa will be introduced and tax breaks offered to start-ups to create a “dynamic, 21st century economy” underpinned by creativity, said Australian Prime Minister Malcolm Turnbull.
The initiative, known as the National Innovation and Science Agenda, will introduce new tax breaks for early-stage investors in start-ups, giving them a 20pc non-refundable tax offset based on the size of their investment, as well as an exemption from capital gains tax.
Mining accounts for almost 10pc of the Australian economy and the country is highly dependent on the sale of iron ore and coal to China, its largest trading partner.
Under the changes, investors will receive a 20% nonrefundable tax rebate up to the value of $200,000 per investor per year, and a 10-year capital gains tax exemption. Venture capital investors will receive a 10% tax offset to expand startups in their early stages. The tax incentives will cost $106m over the forward estimates.
The scope of which businesses will be eligible for the tax breaks is still to be determined, with Turnbull saying the government is engaging in a consultation period before the changes come into play in July next year.
The secretary of the Australian Council of Trade Unions, Dave Oliver, said he was worried investors might “rort” the new system and leave workers and creditors “out of pocket”.
Startups will be able to apply faster depreciation on their intangible assets, such as patents, in order to bring them in line with other assets, allowing business owners to make larger tax deductions over shorter periods of time. This measure will cost $80m over four years.
Government as an exemplar
Many programs in the package look at what the federal government can do to lead the way on innovation. The government will set up a new independent statutory body responsible for driving long-term policy on science and innovation, at a cost of $8m.
A new committee of cabinet, to be chaired by the prime minister, will also be formed.
A digital marketplace to help small and medium-sized enterprises to business with the federal government will be created. That initiative will cost $15m over four years.
Turnbull has reversed a decision made by his predecessor, Tony Abbott, to scrap data research body, Data61. The body is the result of a merger between National ICT Australia (Nicta) and the CSIRO’s digital research unit. Funding for Data61 was due to run out in July next year. It will now be funded until 2019, at a cost of $75m all up.
Turnbull also announced the government will change bankruptcy laws in order to minimise the risk associated with launching startups. The government will introduce “safe harbours” for company directors to protect against personal liability for insolvent trading, as long as they appoint an adviser to try and spare the company financial difficulty. The default bankruptcy period will also be decreased from three years to 12 months.
“Changes to insolvency laws will help foster a culture of appropriate risk-taking,” a statement by the Business Council of Australia said. “Safe harbour provisions and reducing the bankruptcy period from three years to one strike a balance between protecting investors and creditors, while also promoting a more innovative business culture.”
The government will spend $10m over four years in establishing a Biomedical Translation Fund with the private sector for commercialising medical research, and a further $15m for a new innovation fund within the government’s peak scientific research body, the CSIRO. The fund would help companies develop technology created by the CSIRO.
Another $20m will go to the CSIRO to help expand its accelerator program, but the overall funding injection of $90m falls well short of the $115m that was taken out of the organisation when the Coalition came to power in 2013.