Most current tax subsidies (superannuation, negative gearing, franking) favour mature, and generally income generating investments over early stage growth investments. The cost of superannuation tax concessions alone costs $25 billion per year and is growing rapidly.
To incentivise growth, the tax subsidies need to be recast. Close off loop holes for mature stage investments that can stand on their own two feet. Then provide tax incentives to grow early stage investments like IT & biotech that at $2.5b per year are a drop of water compared to the ocean of superannuation and property investments. These tax incentives need to be targeted yet not be so complex or specific it amounts to "picking winners".
The fundamental distinguishing feature of early stage investing is research & development expenditure in new "disruptive" technologies rather than investing in "sustaining" technology. The current incentive system for R&D is too complex, poorly targeted and ineffective. It needs to be recast so that even a single entrepreneur operating from a garage can access it. Furthermore, conventional tax incentives won't work in early stage startups as most of these are initially loss making and don't pay tax in the early years.
Ironically, taking concepts from the mining tax could be useful here - ie: assuming a prevailing 30% corporate tax rate, the government needs to become a 30% equity partner for the expenditure that startups incur in establishing patents, licensing technology, or hiring R&D staff. Unlike the mining tax, this 30% partnership needs to be a genuine partnership, where the Government funds it's 30% share upfront rather than only offering tax credits against future tax liabilities.
In terms of how loopholes for superannuation should be closed off, this should be done by putting caps on maximum balances for each investment category, ie: lifetime tax concessions for superannuation balances in property and mature companies should be limited to somewhere around $1.5m (balances below this amount serve to reduce call on government pensions via the pension assets test and so rightly should attract a tax concession). Super investments in startup and early stage companies would be uncapped (and also not be subject to the annual contribution caps), so they will continue to attract superannuation tax concessions. This would serve to grow the pool of funding available to startups.
Investment in greenfield infrastructure and public transit infrastructure should likewise attract Federal Government subsidies. A similar 30% co-funding model could apply - ie: treat greenfield infrastructure investment as equivalent to investing in early stage startups and also allow these investments to be exempt from superannuation contribution caps.
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