Alexis Kokkinos, partner and executive director of tax consulting for Pitcher Partners, noted that as budget season fast approaches, it is critical that the government establishes effective tax arrangements for start-up investors.
“To a large extent, the government missed the mark on its crowd-sourcing equity funding legislation, requiring that start-ups are structured as public companies, capping crowdfunding limits at a paltry $5 million a year and not allowing for crowdfunding platforms to aggregate equity funding through a vehicle like a managed investment trust,” Mr Kokkinos said.
He acknowledged that by encouraging targeted investments into Australian start-ups with great ideas, the government is making positive steps to drive innovative growth – however, some issues still remain.
“The proposals in their current form may still be beset by the issues of high compliance costs and definitional ambiguity unless worked through appropriately,” he added.
Pitcher Partners identified three main considerations it wished to make the government aware of as a direct response to the February consultation paper regarding tax incentives.
“It would make more sense to latch onto existing R&D legislation and requirements instead of setting up a separate definition and qualification scheme for identifying innovation companies,” said Mr Kokkinos.
“Secondly, the discussion paper includes a list of activities that are excluded from being eligible under the similar UK Seed Enterprise Investment Scheme. Our strong recommendation is that the government reviews this list to ensure that fintech operators, robo-advice platforms, peer-to-peer lending platforms, digital currency operators and the like are not inadvertently excluded,” he added.
“Finally, the government has sought input into protections that should be in place for investors. We recognise that protection of investors should be a paramount consideration for government but we highlight that significant investor protection is already afforded under the Corporations Act 2001,” Mr Kokkinos concluded.
