New Grants

Are you an angel investor or start-up company?

From 1 July 2016, if you invest in a qualifying early stage innovation company (ESIC), you may be eligible for tax incentives.

Tax incentives for early stage investors

The object of the early stage innovation company (ESIC) regime is to encourage new investment in small Australian innovation companies with high-growth potential, by providing a tax offset and modified CGT treatment to qualifying investors.

From 1 July 2016, if you invest in a qualifying early stage innovation company (ESIC), you may be eligible for tax incentives.

The object of the early stage innovation company (ESIC) regime is to encourage new investment in small Australian innovation companies with high-growth potential, by providing a tax offset and modified CGT treatment to qualifying investors.

From 1 July 2016, if you invest in a qualifying early stage innovation company (ESIC), you may be eligible for tax incentives.

The tax incentives provide eligible investors who purchase new shares in an ESIC with a:

  • non-refundable carry forward tax offset equal to 20% of the amount paid for their qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year
  • modified capital gains tax (CGT) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than ten years may be disregarded. Capital losses on shares held less than ten years must be disregarded.

The maximum tax offset cap of $200,000 doesn’t limit the shares that qualify for the modified CGT treatment.

Investors that don’t meet the ‘sophisticated investor’ test under the Corporations Act 2001 won’t be eligible for any tax incentives if their total investment in qualifying ESICs in an income year is more than $50,000.

The tax incentives for early stage investors (sometimes referred to as ‘angel investors’) are contained in Division 360 of the Income Tax Assessment Act 1997.

The ATO is seeking feedback on these discussion papers:

  • a subsidiary test
  • expenditure test times
  • incurred expenses.

The documents are available for feedback on the ATO’s Let’s Talk page between 13 March and 10 April.

ESIC company or investor help

If you want to find out more about how this can help you as an investor or you as a company Treadstone can provide you with expert help through our network of professional support. Call us to arrange a discussion now on (03) 9008 5937 or contact us .

 

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