Taxation Benefits for Investors
Business Advisory Services Update
Investors who contribute capital to a company that wishes to qualify as an Early Stage Innovation Company (ESIC) receive significant taxation benefits from the ATO for their investment in a company that fulfils the requirements.
The benefit for the company is that it receives the investment funds for use in the company’s activities that might not have been received if there was no incentive for investors.
Investors can qualify for two (2) separate tax incentives:
- A Taxation Offset calculated at 20% of the investment with a maximum offset available for a sophisticated investor of $200,000 and for a retail investor at $10,000.
- If the investor retains the shares that were allocated as part of the ESIC status process for more than 12 months and less than 10 years, the shareholder will be able to disregard any Capital Gain in relation to the shares that were allocated as part of the ESIC status process.
The ESIC legislation was a significant initiative of the Australian Government to assist ‘young innovative companies’ to raise capital. This is a key initiative for the SME market from which accountancy firms can benefit, by proactively promoting services in relation to assisting companies with the ESIC documentation, as firms offer interesting and challenging work such as:
Business Plans.
Predictive Accounting Reports – budgets, cash flow forecast, projected balance sheets.
Documentation relative to the ESIC status that, if the company has completed the Principles Test needs to be lodged with the ATO for approval and if the company has self-assessed under the Gateway Test, the documentation is required to be retained to satisfy any subsequent audit.
ESS BIZTOOLS has developed ‘Early Stage Innovation Company Product Package’, to assist Accountants/Bookkeepers to deliver this type of service to SMEs.
To find out more, contact us on 1800 232 088 or email , to arrange a complimentary initial consultation via Zoom.
