In a submission to the Federal Government’s Tax White Paper Process, Social Ventures Australia (SVA) is encouraging tax concessions for impact investments in social enterprise, social impact bonds and social and affordable housing projects.
Current tax arrangements favour charitable non-profit organisations, particularly those that have deductible gift recipient (DGR) status. Organisations that deliver similar if not the same services under a social enterprise or social impact bond structure benefit from few such exemptions despite often operating in a more sustainable manner.
The SVA submission suggests there are two main opportunities for tax policy change in this area:
1. Investors should be able to offset the amount invested in a social enterprise or social impact bond against their assessable taxable income in the year that the investment is made, as well as enjoy a tax exemption for interest repayments or dividends as they are repaid during the life of the investment. Capital gains tax should also be exempt when the impact investment is held for a minimum period.
2. A new social infrastructure tax offset scheme should be implemented using non-deductible/non-assessable social and affordable housing bonds so that investors can lend at sub-market rates to developers building new social and affordable housing stock.
Ian Learmonth, Executive Director of Impact Investing at SVA commented:
‘Social enterprises like all businesses require access to capital to operate and grow. Tax offsets could play a central role in encouraging investors to invest in enterprises and other social impact projects with social benefits that are expected to considerably outweigh the tax revenue that may be forgone by the government through the new arrangements. Government savings can include reduced welfare payments and reductions in government expenditure in areas such as corrective services, emergency hospital and policing costs.’
In the UK and US similar initiatives have been credited with generating significant new investments in social initiatives and disadvantaged communities.
