Innovation statement: startups ‘free to fail’ in bid to encourage risk-taking24 December, 2015 / Articles
Personal liability laws for company directors whose business ventures fail will be relaxed in a bid to encourage investors to take more risks with new ventures, as part of a $1.1bn innovation package announced on Monday.
The package includes wide-ranging tax changes to promote investment in the early stages of research and development projects. Investors will received a 20% tax offset on investments in startups, capped at $200,000 per investor per year, and a 10-year exemption on capital gains tax, provided investments are held for three years.
The tax incentives will cost the government $106m over five years.
Insolvency laws that “focus on penalising and stigmatising business failure” would be changed to encourage investors to put money into more risky ventures, the treasurer, Scott Morrison, said.
The default bankruptcy period will be reduced from three years to 12 months, and a “safe harbour” will be introduced to protect company directors from personal liability for insolvent trading if they appoint a professional restructuring adviser to turn the business’s fortunes around.
Malcolm Turnbull said insolvency laws were weighted too heavily towards protecting secured creditors.
The changes would ensure “greater business continuity”, the prime minister said. “This doesn’t release directors from any of their obligations,” he said. “This is a long overdue … and worthwhile change.”
Turnbull admitted the changes to bankruptcy laws could carry a risk for the government if overused or misused by company directors.
“One of the aspects of the political paradigm I’m seeking to change is the old politics where politicians felt they had to guarantee that every policy would work. They had to water everything down so there was no element of risk. Let me tell you: I’m not guaranteeing that all of these policies will be as successful as we hope they will be,” the prime minister told reporters.
“If some of these policies are not as successful as we like, we will change them. We will learn from them. Because that is what a 21st century government has got to be. It has got to be as agile as the startup businesses it seeks to inspire.”
Turnbull said that even if businesses fail, lessons can be learned from their attempts.
“We want to be a culture, a national culture of innovation, of risk-taking, because as we do that, we grow the whole ecosystem of innovation right across the economy,” he said.
The package includes $30m over five years for a new cyber security growth centre.
The government will change laws to allow the private sector to access “non-sensitive” public data to create new products and services.
An extra $90m will go towards the CSIRO, but the new money does not match the $115m taken out of the organisation since the Coalition came to power in 2013.
Labor’s spokesman for digital innovation and startups, Ed Husic, told Sky News that the industry was smarting from budget cuts.
“We’re playing a massive game of catchup after two years of Coalition cuts in this area, to CSIRO,” he said.
Labor had also cut funding to the scientific research body when it was in office, but Husic did not guarantee reinstating the money, saying the opposition would need to see the “true state of the budget” before making that commitment.
Women in science, technology, engineering and maths will receive a boost of $13m over the forward estimates.
Morrison told Macquarie Radio on Monday morning the $1.1bn in the package would be offset in the mid-year economic forecast, to be announced next week.
The details of the funding, including whether money came out of existing programs and organisations to fund the $1.1bn commitment, would be announced in next week’s Myefo statement.