A growing number of governments are seeking to provide political might to support financial innovation. While the UK may have trailblazed a path for the rest of the world, there is still time to catch up but without governmental acknowledgement it is pretty tough to do. In a document published by the Australian government, Scott Morrison Treasurer of Australia stated;
“FinTech is transforming our financial system and potentially our entire economy and it’s not just about digitising transactions… FinTech is going to revolutionise how consumers and businesses, as the drivers of economic activity, interact. This is going to have big implications for demand in the future. We need to be part of these changes and we have got to work out the best way to engage with FinTech and prepare for the financial system and economy of the future.”
Acknowledging and embracing change is the first step in empowering the entrepreneurs that actually do the heavy lifting by shouldering the risk. The Aussie government understands that “a stronger transitioning economy provides [their] society with more jobs and higher incomes, as well as the opportunity and conditions to foster enterprise and innovation.” The policy makers want to back and support innovation. This means not creating un-necessary burdens and allowing entrenched incumbents to create barriers to entry – standard practice in many industries.
Now, of course, words can be of little benefit without action. What has the Australian government accomplished (or expected to come soon) to match the strong rhetoric supporting disruptive innovation?
- These incentives include a 20 per cent non-refundable tax offset on investment capped at $200,000 per investor per year; and
- a new 10 year capital gains tax exemption for investments held for 12 months.
- Created Early Stage Venture Capital Limited Partnerships (ESVCLPs), investment vehicles that provide tax exemptions for those investing in innovative companies at the early and growth stages of a start-up.
- Limited partners in new ESVCLPs will receive a 10 per cent investor tax offset on capital invested during the year.
- The maximum fund size for new and existing ESVCLPs will be increased from $100 million to $200 million.
- ESVCLPs will no longer need to divest a company when its total assets exceed $250 million.
Australia’s financial services sector happens to be the largest contributor to the national economy, contributing around $140 billion to GDP last year. So it really makes sense to support what is arguably the most important industry sector in the country. You may read the paper below.
This does make one wonder what, exactly, the largest economy in the world is doing? The recent Innovation Initiative announced by Representatives McHenry and McCarthy could be just what the USA needs. Innovation and entrepreneurial creativity is something no government nor individual should ever take for granted.
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