It has created an immediate absolute dry season of funding. A complete drought!
To be eligible for the tax incentives (for early stage investors such as capital gains tax exemption and a 20% tax offset), the purchase of newly issued shares must occur after the 1st of July 2016 or Royal Assent, whichever comes later.
Even if the bill passes quickly, everyone has to at least wait till the 1st July 2016.
I am aware of one investment group on a project who understandably no longer wants to invest in April, but now wants to wait till at the bill comes into effect.
The interesting thing is, admittedly, almost all the tax amendments over the last 10 years have been closing down holes and usually are dated back to the announcement date. Why in this case did we create the funding gap and put the effective date into the future? Even deals that are on the table and haven't been signed are highly likely to be postponed due to the generous effect of the bill for investors. Even existing open channels are likely to dry up.
So....
Where will ESIC's (Early Stage Innovation Companies) get funding between now and 1st July 2016 / Royal Assent?
How many ESIC's will now fall over with no access to funding for at least 3-4 months?
Lets hope for an amendment to back date the effective date and that existing funding will sustain you until the wet season!
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