Innovation Tax Changes

Why does “innovation” have anything to do with tax changes? In the Government’s Innovation Statement most of the expenditure is making tax changes.

Tax is a revenue raising device… Not a method to change people’s actions. When you use tax policy to do anything other than raise revenue you get bad policy.

But here are the changes announced.

The “same business test” becomes the “predominantly similar business test”. This means you can still get to the losses if the business uses similar assets and generates income from similar sources. Let the loss trading begin!

Taxpayers will now be able to self-assess the tax effective life of acquired intangible assets that are currently fixed by statute. So instead of having to depreciate a patent over 20 years or in house software over 5, a taxpayer can now self assess its life.

Are you excited yet???

Early Stage Venture Capital Limited Partnerships (stay away as these are messy) will be able to get a10% non-refundable tax offset on capital invested. These partnerships can also get bigger than the current law allows before having to wind up.

Wake me up…

Lastly, certain investors will get a 20% non-refundable tax offset on investments (capped at $200,000 per investor per year) and a 10 year exemption on capital gains tax, provided investments are held for three years. Now this sounds more exciting. So what can I invest in to get these benefits?

The Government has not decided yet…. ARRRRAAAAHHHH. All we know is that these company must have been incorporated during the last three income years, not listed on any stock exchange and have expenditure and income of less than $1 million and $200,000. But in addition to this the company must be undertaking eligible activities – and no one knows what these are. This is just a perfect example of the marking coming before the policy!

Lets talk in 2016 about this

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
This entry was posted in Income Tax, Legislation, Planning Stuff, Tax Policy. Bookmark the permalink.

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