Tech Investors Push for Tax Breaks

September 1st, 2014

Swanson Reed - Specialist R&D Tax Advisors

Tax breaks enjoyed by property investors should be diverted to support innovative, job-creating companies instead, according to tech entrepreneurs.

A lower tax rate on start-up income, a zero capital gains tax and a way for investors to use losses would boost the start-up industry and create jobs in a tumultuous market. Chief Executive, Matt Barrie says it was the tech industry who created the world’s youngest billionaire – Mark Zuckerberg.

“I cannot think of any other industry other than the tech industry, where a 20-year-old can start a company and is worth billions in a few years, which is what happened with Facebook,” he said.

“If you think about the future of the country, isn’t it more beneficial to have high growth businesses being created rather than an over-priced property market?”

More than 1.3 million landlords claimed almost $14 billion in tax losses, at a cost to taxpayers of $4 billion, which could all of been better spent, technology investors argue. While investors in start-ups can claim tax breaks on investment loans, countries including the UK and Singapore give more generous tax incentives – up to 50 per cent income tax relief to start-up investors.

Scale Investors Chief Executive, Laura Mckenzie said she’s never understood why there are such attractive tax breaks for Australian property investment.

“If the Australian government is to be globally competitive as our economy from and investment prospective, it should consider implementing similar schemes to the UK, which encourages angel investment,” she said.

Aside from the existing R&D tax break for companies, Australia has an Early Stage venture Capital Limited Partnerships program, which allows venture capital funds to set up and operate tax free.

SEEK co-founder, Paul Bassat said the program was ‘too restrictive for people like us.’

“Once the company became profitable, we paid hundred of thousands of dollars in tax,” Mr Bassat said.

Many tech experts agree it would be better to remove negative gearing tax breaks and use that to invest into tech industries.

Currently, one of the best ways for companies to get ahead is to take advantage of the government’s 43.5 per cent R&D tax break while it’s still around.

Co-founder of crowd-funding venture, Equitise, Chris Gilbert said the government should look to the UK where there are already tax relief schemes for angel investors in recognition of the risks these people take in providing a source of capital for small business.

“With property being overpriced and technology being the way of the future, there’s a huge opportunity to invest in early stage businesses in Australia,” he said.

If Facebook is anything to go by, investing in innovative tech start-ups may be an incredibly profitable investment in the future.