The Turnbull Government has taken another step to improve our tax system and encourage innovation by introducing legislation into Parliament today, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said.
The Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017 introduced today is part of the National Innovation and Science Agenda, and includes measures designed to ensure the tax system encourages sensible risk-taking and investment in innovative companies.
The increasing access to company losses measure makes it easier for loss-making companies to seek out new capital and new opportunities in order to return to profitability. The ‘same business test’, which can prevent companies from claiming past year losses as a tax deduction where they have changed their business, will be relaxed and a ‘similar business test’ introduced.
This more flexible approach to accessing company losses will ensure that companies do not face tax penalties for innovating and risk tasking in an effort to improve their business. Loosening the inflexible rules will encourage investment and growth in our innovative businesses.
The new relaxed test applies to losses made in income years commencing from 1 July 2015.
Innovative companies are more likely to hold a high proportion of intangible knowledge-based assets such as patents and copyrights. Currently, these kinds of intangible assets have a depreciation effective life set by statute but, unlike with tangible assets, businesses don’t have an option to make their own determination of how long the asset will be economically useful.
The intangible asset depreciation measure changes will allow owners of those intangible assets which currently have a statutory effective life to self-assess the life of their assets. Bringing their tax life in line with the economic life of the asset will increase the depreciation benefits and decrease the cost of investment in these assets.
The new ability for businesses to self-assess the effective life of intangible assets will apply to assets acquired from 1 July 2016.
This legislation delivers on the Government’s commitments under the National Innovation and Science Agenda, and ensures our tax system doesn’t penalise innovation, supports investment in innovative companies, and provides incentives to change and grow.