Current legislation in Australia means equity crowdfunding platforms have significant regulatory barriers which include:
- Limitations around the involvement of ‘retail/unsophisticated’ investors; and
- The classification of what constitutes a public company (limitation of private company shareholders); and
- Marketing of private placement deals to the market (i.e. socialisation which is the pure essence of how crowdfunding works).
These barriers have all but stopped anyone but high net-worth individuals taking advantage of equity crowdfunding opportunities and in a CAMAC report written to provide advice to the government last year there was very strong support for the implantation of Crowd Sourced Equity Funding (CSEF) legislation.
The federal budget was announced yesterday, and had much anticipation for what the government would be hiding under its sleeve regarding the CSEF legislation. Overall, the government has delivered on promises and the budget has revealed a positive step towards following the global trend and legalising equity crowdfunding. No definitive time was given as to when the legislation changes are to be implemented, however it’s estimated to be sometime in 2016.
Here’s a brief summary of what has changed within the budget
The government has included $7.8 million in the budget to facilitate the introduction of Crowd Sourced Equity Funding. The $7.8 million in capital will be allocated to the Australian Securities and Investments Commission to implement and monitor a regulatory framework to facilitate the use of CSEF, including simplified reporting and disclosure requirements according to the provisions in the budget paper. The total funding for the FY2015-2016 will amount to $2.6 million in support for CSEF.
According to the Treasury, this will help small business invest more, grow, and employ more Australians. This allocation of capital has set in motion the pathway for equity crowdfunding and we are confident of and are closely watching developments on this front.
Other Budgetary Changes
There were also a number of changes in the budget that affected not just CSEF platforms but the startups and small businesses that these platforms rely on including:
Tax benefits for startups and small business
The official budget document for Growing Jobs and Small Business states that from 1 July 2015, expanded tax concessions for Employee Share Schemes will enable employees to share in, and benefit from, the future growth and success of the business.
It will also allow business owners to invest more of the company’s cash into growing the business. This $200 million investment will generate rewards for our entire economy.
Jobs and Small Business Package
The Jobs and Small Business package will total $5.5 billion worth of strategies.
This is a major step towards establishing the CSEF industry and building the Fintech in Australia. As such, this crucial moment is an important step in building a competitive local economy in the Asia Pacific region and establishing leadership in the Fintech industry.
What these changes mean for business growth and investment?
Equitise equity crowdfunding platform was formed with one main goal, to connect businesses that want to grow with likeminded investors. We’re convinced that this platform and these government changes are good for the economy and will help stimulate and grow Australian startups and established businesses alike. These changes may be some time away but in the meantime click here to signup to our platform and ensure you keep following this blog for the latest in equity crowdfunding.