The Murray Report describes certain tax distortions in relation to start-ups and notes the need for better targeted tax settings to facilitate innovation, acknowledgement of the barrier to fundraising caused by existing tax uncertainty around venture capital limited partnerships and recognition of the benefits of more flexible access to R&D tax offsets.
The Report cites stakeholders as suggesting that Australia is already lagging other jurisdictions in the facilitation of crowdfunding, meaning time is of the essence. Equity investment is a critical aspect of the viability of seed-stage and early-stage ventures as banks traditionally do not lend to pre-revenue companies. The costs of preparing a prospectus for most seed-stage and early-stage enterprises would normally be prohibitive. We see meaningful benefit in creating a new special category of small scale offering for crowdfunding which:
- recognises the 20 cap on investors is not appropriate and that there is a strong argument that no cap on the number of investors should apply
- reassesses the cap of $2m and considers a graduated cap depending on the risk factors associated with the issuer, and
- balances these additional risks with a pragmatic basic disclosure regime (where no regime might otherwise apply) as well as reporting with minimal red-tape to ensure an appropriately informed market.