Based on this, there are five policies and incentives that Australia could easily adopt:
In the UK, investors in a qualifying company who hold their shares for a minimum period are eligible for tax relief of between 20-30%. This can be offset against their personal tax liability in the year their investment was made, with a maximum deduction of up to £100,000.
Contrast this to the changes introduced to Australian laws affecting Employee Share Schemes not so long ago. These changes removed some of the tax benefits available to start-ups to attract management talent they most often couldn’t afford to pay for in traditional salary and wages agreements.
A capital gains tax exemption for investors that receive the income tax relief, but dispose of their shares before the minimum holding period is reached.
Loss relief that provides the ability for a loss on the disposal of shares minus any income tax relief.
This would be applied against income in the year the shares were disposed or the prior year instead of being offset against capital gains.
Capital gains tax deferral relief, which allows payment of tax on a capital gain to be deferred when the gain is invested in shares of an EIS qualifying company.
The gain can come from the disposal of any type of asset, but the investment must be made within the year before or three years after the gain arose.
The EIS also supports investment through EIS Funds, which coordinates investment in a number of companies on business angels’ behalf.
This saves investors the time spent on the investment process and administration if they were to invest on their own as an individual.
In Australia, the formation of angel groups is a self-organised means of achieving the same level of coordination and provides mutual support for new angels learning about the investment process, opportunities and pitfalls.
Formal recognition, funding and government support for these groups, as well as peak bodies, to further develop and grow the business angel community is required.
If we are genuinely concerned about a two-speed economy, then shouldn’t we assist this important segment of our business community?
One way the government can achieve this is by directing some of the funds generated from the resources and mining taxes towards the support and growth of a vibrant angel investment community.
This level of funding and support is needed if we are to promote and send our start-ups out there to compete on a global field and expect the resulting innovation, employment and financial benefits to flow back to our economy.
Marc Peskett is a director of MPR Group a Melbourne based business that provides finance lending, grants advisory and capital raising services as well as business advisory, tax, outsourced accounting, and wealth management to fast growing small to medium enterprises. MPR Group is a member of the Proactive Accountants Network.
You can follow Marc on Twitter @mpeskett
