Fintech Market Overview

This article does not constitute legal advice.

Fintech in Australia

Fintech Software

Given the proliferation of fintech providers in Australia, there is a lot of publicly available data reporting on trends and concentration of fintech providers and sectors. ASIC's Innovation Hub website also publishes guidance and details of events relevant to fintech providers.1

Investments in fintechs can potentially be made through concessionally taxed Australian incorporated limited partnerships called 'early-stage venture capital limited partnerships' and 'venture capital limited partnerships'. Subject to satisfying certain eligibility criteria, such investments may receive favourable tax treatment. Depending on the investment vehicle, benefits can include tax exemptions for resident and non-resident investors on revenue and capital gains on a disposal of the investment, plus a 10 per cent non-refundable tax offset available for new capital invested and the carried interest of fund managers being treated on capital account.1

A programme known as the R&D Tax Incentive is available for entities incurring eligible expenditure on research and development (R&D) activities, which includes certain software R&D activities commonly conducted by fintechs. Claimants under the R&D Tax Incentive may be eligible for one of the following incentives:

  • small businesses (less than A$20 million aggregated turnover) not controlled by exempt entities: a 43.5 per cent refundable tax offset
  • other businesses (aggregated turnover of A$20 million or more or controlled by exempt entities): a 38.5 per cent non-refundable tax offset for eligible expenditure below A$100 million and 30 per cent for eligible expenditure over A$100 million 1

Significant changes to the R&D Tax Incentive were enacted and apply from the first income year commencing on or after 1 July 2021. Under the changes, companies with an annual aggregated turnover of less than A$20 million may be able to access a refundable offset of 18.5 per cent above the claimant's corporate tax rate, which, from 1 July 2021, is 25 per cent providing a 43.5 per cent refundable tax offset. The changes also included the introduction of an 'incremental intensity threshold' that increases the tax offset available to companies with an annual aggregated turnover of A$20 million or more based on the proportion of their eligible R&D expenditure as a percentage of total business expenditure.1

Crowdfunding in Australia

Fintech in other countries

  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/australia
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