Funding in Australian startups is set to increase following the government's Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 coming into effect in July.

The government of Australia hopes to encourage early-stage investment in startups following the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 being passed by the Senate, according to Startup Smart.

The tax incentives outlined in the bill come into effect from July and include a 20% tax offset on investment in innovation companies, within a specific legal definition of “innovation”.

The term has been defined as a company less than three years old with expenditure of under A$1m. The company also needs accessible income of less than A$200,000 in the past income year.

Other incentives include a 10-year capital gains tax exemption for investments held for at least 12 months, an increase in fund size for early-stage venture capital limited partners to A$200m and tax cuts for non-sophisticated investors with an investment cap.

The bill was first announced in the government’s A$1.1bn ($799m) innovation statement made in 2015. It passed the Senate with support from the opposition with some minor alterations.

Christopher Pyne, minister for innovation, said: “Over 4,500 startups are missing out on equity finance each year. These measures will help startups get access to crucial funding to grow their startups.

“Investors, venture capital funds and innovative companies in all industries will benefit from these measures.”

– Image courtesy of JJ Harrison under a CC BY-SA 3.0 license (source)