RSM Australia

2015-16 budget for research and development

There was minimal content in the Budget that will have an impact on Australian innovation. The following are the relevant key Budget announcements:

Crowd funding

The much anticipated and discussed need to support innovators through crowd sourced equity is being supported with a budget of $7.8m for the Australian Securities and Investment Commission to implement and monitor a regulatory framework to facilitate the use of crowd-source equity funding (CSEF), including simplified reporting and disclosure requirements.
 
Reduced tax rate for small business

The company tax rate for companies with aggregated annual turnover less than $2m will reduce to 28.5%, from the 2015/16 financial year.  It is worth noting that while the R&D Tax Offset remains at 45% for those companies, the effective after tax benefit will increase to 16.5%, from the current 15%.

Employee Share Scheme

Significant Employee Share Scheme changes were introduced in March 2015 to improve a company’s ability to provide share incentives for staff.  Some additions to this have been included in the Budget.  This should assist innovators with their ability to attract appropriate expertise.

Medical Research Future Fund

The budget announced the first distributions of the Medical Research Future Fund (MRFF), that was introduced in the 2014/15 Budget, of $10m in 2015/16 and $400m over the forward estimates. The legislation to establish the MRFF will be introduced on 1 August 2015.

Summary

These announcements will have some benefits for startup innovators.  For direct financial impact, the CSEF could be a significant opportunity for startup innovators to raise the critical early stage capital they require which is currently hard to raise in Australia.  This combined with the improvements to the employee share scheme provides a better environment for the early stage companies in Australia. 

The anticipated tax white paper is likely to contain more content covering the future direction of Australian innovation tax policy. Submissions are currently open and interested parties should provide comments and suggestions on direction and improvements to advance Australian tax incentives for innovation, such as patent box discussion.