The government will carry out consultation on draft legislation to support crowd-sourced equity raising by the end of the year.
The government has backed a recommendation by the Financial Services Inquiry to make the funding model more accessible and says Assistant Treasurer Josh Frydenberg and Minister for Small Business Bruce Billson will lead talks with stakeholders.
Many entrepreneurs and venture capitalists want the government to abolish the requirement that start-ups register as a public company before accessing crowd-sourced equity funding, which gives investors a stake in a future company.
The government has also looked at making it easier and cheaper for start-ups to become public companies.
Australian Chamber of Commerce and Industry chief executive Kate Carnell welcomed the government's response, which appears to give substance to Prime Minister Malcolm Turnbull's oft-repeated call for Australia to become a more innovative nation.
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"Business welcomes the government's intention to secure crowd-sourced equity funding legislation," Ms Carnell said.
"This will give greater scope to widen its focus to crowd-sourced debt funding which, done correctly, would also be very positive for small business growth and start-ups."
Similar reforms have already been implemented in New Zealand, the United States and the UK.
