Eligible start-ups will be defined as having a maximum of 25 employees and a maximum $400,000 in assets. A limit of $300,000 would be able to be raised under the scheme per year.

Capital gains exemption

Labor's policy will also offer a full capital gains tax exemption for equity held in the startup venture for more than three years, and any realised losses following investment in the scheme could be deducted against wage and salary income.

Mr Shorten said the incentive will reward individual support for the nation's early stage innovation effort via modest tax relief to investors who purchase an equity stake in those businesses.

"The benefits of targeting significant tax relief to very early stage startups is that these they have the most trouble getting access to finance because its where the largest market barriers exist," he said.

Bill Shortenâs proposed road show has raised eyebrows among ALP insiders, concerned itâs an inadequate response to his poor 14 per cent preferred PM rating. Alex Ellinghausen

"Once early stage startups have proven concepts and get on their feet, they are in a better position to then seek out other avenues of finance, such as venture capital and crowd-source funding."

He said it was lamentable that Australia punts more on the Melbourne Cup each year than it invests all year in innovative new startup businesses.


"Not enough finance is flowing into our startup sector, which is stunting innovation in Australia, slowing the development of new ideas and new business opportunities."

Angel investors directed just $21million to Australian startups in 40 deals in 2012.

Labor would also make changes to the Early Stage Venture Capital Limited Partnerships scheme, which provides preferential tax treatment for venture capital investors, by lowering the minimum level of investment required for entry into the scheme from $10 million to $5 million.

Currently the ESVCLP rules restrict any one entity from contributing more than 30 per cent of a fund. Only financial institutions are exempt from this rule.

Mr Shorten said to encourage greater participation from investors in other sectors, rules should enable the regulator to provide exemptions for certain widely held companies who demonstrate an active, sizeable commitment to Australian innovation.