Macfarlane rings in the tax changes


James Riley
Editorial Director

The federal government is considering a range of tax incentives to encourage more capital to find its way into higher risk investments. But if you’re a local tech startup, don’t hold your breath waiting for the changes to arrive.

While the federal Cabinet is understood to have approved the National Industry Investment and Competitiveness Agenda, which contains a crowd-sourced funding initiative and changes to the tax treatment of employee share schemes, the more substantive incentives aimed at angels and venture capital are not a part of the agenda.

Government has promised to produce a tax review whitepaper by the end of 2015 and the more substantial tax incentives that would improve Australia’s competitiveness against global peers are likely to be considered as a part of that broader process.

Macfarlane rings in the tax changes

Whatever changes might be proposed in the tax review whitepaper would then be taken to the next election.

For an industry that is struggling with a broken local VC sector, the time-lag is a problem. That is, the time-lag between the Innovation Investment Fund (IIF) being scrapped in the May budget and replacement incentives being announced.

Ian Macfarlane is a man who has a way with words. On tax, he likes to keep it simple. He says there is a bit of arby-bargy inside government over the use of the tax system to create investment incentives. There are measures being discussed that mimick tax schemes used by Australia’s competitors, he says. He is talking about the UK.

“This stuff is not rocket science,” Mr Macfarlane told the Q&A session at the Sydney Institute last week. “A lot of it is just getting the bean counters down the hill from Parliament House to understand that like any business, you have to  spend a bit [of money] – or forego a bit – in order to make a bit [of money].”

“If we want companies to get established and stay in Australia and to be successful, then we are going to have to get over this mindset in the Treasury and Finance [departments] that say you can’t give any concessions,” he said.

“Everywhere else in the world, [other countries] are giving tax concessions in the short term to make the business establish itself and stay in that country.”

“Those are things that we will look at through the Tax Review and through subsequent programs over the years going forward,” Mr Macfarlane said (as if reminding the room not to hold their breath.)

Ian Macfarlane has form in this area. He was the Minister who reformed early stage venture capital limited partnerships as Industry Minister during the Howard years, although he does “accept that we didn’t go far enough and [that] it is an area we are prepared to look again.”

Regardless, despite tax being a Treasury issue, and incentives being an Industry department issue, it is the the Communications Minister Malcolm Turnbull who is doing the driving in this area.

Do you know more? Contact James Riley via Email.

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