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According to the ATO, if you invest in a qualifying Early Stage Innovation Company (ESIC) you may be eligible for a tax incentive for early stage investors. This is sometimes more commonly known as angel investors. This initiative was created by the National Innovation and Science Agenda (NISA), in order to encourage investment into innovative and growing businesses. They do this by providing a concessional tax treatment to the aligned investors. The tax incentive program is designed to encourage investing in start-ups by giving the investors tax breaks when they give capital to small innovating companies.
How the program works is that it gives investors:
In order for investors to actually be eligible and qualify for the tax benefit treatment there are a number of stages they need to pass which we have outlined below for your convenience.
To qualify for the tax incentive for early stage investors, the company you invest in must qualify as an early stage innovation company. (ESIC) But what is an ESIC and how does a company qualify?
Well, a ESIC or Early Stage Innovation Company, is a start-up that has a high amount of innovation and growth capacity. It also has to have less than $200,000 in revenue and less than $1 million in their expenses.
To be an eligible ESIC the company also has to meet 2 requirements which are outlined below.
Early Stage Test - In this Early Stage Test their are 4 requirements:
100 point Innovation Test - This 100 points innovation test is a self-assessed objective test, where the business needs to make up 100 points of the following:
Worth 75 points:
Worth 50 points:
Worth 25 points:
Once the business has eligibility established they then have two options to qualify as ESIC:
It is important that the lodges report before the end of the financial year, so that the investor can claim the tax benefit.
For more information and Assistance in eligibility or qualification on grants and tax incentives: contact the Mark Bouw Group: email@example.com Or visit our website: www.markbouw.com