ESIC Assistance Assists Accountants “Future Proof”
Accountant's Minute 165
Welcome to Accountants Minute.
The ESIC (Early-Stage Innovation Company) journey creates a range of new interesting work and “income streams” which will assist proactive accountants to “future proof” their accountancy businesses.
The ESIC journey will normally commence with:
- research and development relative to the development of a new product, process, service, organisational or management methodology.
Businesses undertaking research and development will require assistance relating to:
- the establishment of appropriate research and development systems
- records
- registration of the research and development project with AusIndustry
- submitting applications to the Australian Taxation office relative to overseas expenditure (if any)
- the lodgement of the company’s income tax return to claim the research and development taxation rebate.
Most companies involved in undertaking research and development activities will require assistance from accountants in order to legally maximise their research and development rebate claim.
Intellectual Property Protection
The next stage of the journey is considering whether the research and development project requires specific protection. This could be by way of documentation of “trade secrets” or the development of Confidentiality Agreements and assignment of Intellectual Property Agreements and possibly discussions with a patent attorney relative to the submission of an application for a patent to IP Australia.
Whilst most of this work is not directly attributed to accountants, a significant number of clients will benefit from “project management” services that an accountant could provide to them to ensure that appropriate systems have been implemented.
Government Grants
Many businesses will not be aware of the government grants that are available to assist businesses that are developed new products or services. The largest grant that is available is the Federal Government’s “Accelerating Commercialisation Grant” which provide grants of up to $1,000,000 on a 50% funding basis. Most businesses will need assistance in the preparation of the two phase “Accelerating Commercialisation Grant” application process. Proactive accountants can offer this service to their clients.
Business Plan
If the client is successful in their application to the Entrepreneur’s Program for An Accelerating Commercialisation Grant it is normal for the grant funding to contribute funds for the development of a Business Plan for the business.
Capital Requirements
Once a company has reached this stage, having completed their research and development, and developed a prototype that gives an indication of what the final product will be able to achieve and then perhaps the company has applied for the Accelerating Commercialisation Grant which shall take the project closer to commercial reality. Most companies will then be running short of money and looking around to various sources trying to raise some capital.
Early Stage Innovation Company
The Australian government introduced legislation with an amendment to the Taxation Act during 2015/16 to create a separate section relative to Early Stage Innovation Companies. The government realised that for companies that are developed new products, processes, services, organisational or management methodologies that most of them would require some assistance if they were going to convince arm’s-length investors to invest in the products or services which at this stage is probably unproven.
Investor Benefits
To facilitate this the government introduced two major inducements for investors:
- a 20% tax offset based on the original investment in the company for arm’s-length investors subject to the maximum investment for a retail investor being $50,000 with the offset been limited to $10,000 and a 20% or $200,000 maximum offset is available for sophisticated investors;
- a capital gains tax exemption on the original investment if the shares are retained for longer than twelve months and less than ten years.
Tests for Companies
The legislation introduced three tests – the first test must be passed by any company aspiring to be an ESIC with the company then being required to pass one of the two remaining tests.
The first test relates to the age of the company – the legislation is primarily targeted at companies three years or under but in some circumstances companies up to six years can apply.
The company and any subsidiary company’s income in the previous financial year has to be under $200,000.
The company and any subsidiary company’s expenditure in the previous financial year has to be under $1,000,000.
The company cannot be registered on a stock exchange anywhere in the world.
The next test is the “Gateway Test” – the company has to earn 100 points from the questions that are asked. If the company earns the 100 points then the company has qualified as an Early-Stage Innovation Company.
If the company cannot pass the “Gateway Test”, the process then moves to “the Principles Test”. In this test the company must be able to submit detailed responses to five specific questions on the company and its products and the likelihood of commercial success for the products.
Most companies who are aspiring to be an Early-Stage Innovation Company will require assistance from an accountant or business advisor to satisfactorily navigate the ESIC due diligence requirements.
ESIC Journey
This journey has created significant new and interesting work and potential income streams for accountants including:
- research and development systems and advice
- intellectual property protection “project management”
- Accelerating Commercialisation Grant applications
- Business Plan preparation
- Budgets and Cashflow Forecasts preparation
- ESIC due diligence reviews
ESS BIZTOOLS has developed a range of product packages which will enable an accountancy firm to deliver these services to your clients. The various packages also include marketing and promotional material for each of the featured products.
The ESS BIZTOOLS’ Silver Package is currently featured as the “New Financial Year Promotion” and is offering a 25% discount meaning that a twelve months 24/7 subscription per office is $1,493 plus GST. The Silver Package also includes 3 x 60 minutes mentoring packages to be presented during the year to assist in the implementation of the process to supply products to the firm’s clients.
ESIC Journey Indicative Fees
The indicative fees to be earned from each component of this journey utilising the ESS BIZTOOLS’ Silver Package are:
| Research and development systems and advice | $5,000 - $10,000 plus GST |
| Intellectual property “project management” | $2,000 - $5,000 plus GST |
| Accelerating Commercialisation Grant Application | $7,500 - $12,000 plus GST |
| Business Plan preparation | $20,000 - $40,000 plus GST |
| Budgets and Cashflow Forecasts | $5,000 - $10,000 plus GST |
| ESIC Due Diligence Reviews including the preparation of a request for an Australian Taxation Office ruling if the company is relying on the “Principles Test” | $7,500 - $10,000 plus GST |
Detailed Overview
You can obtain a detailed overview of the ESS BIZTOOLS’ Silver Package and the Early-Stage Innovation Company Package (which is included in the Silver Package Offer) by logging onto www.essbiztools.com.au/silverpackage.
If you have any questions on any aspect of products that are available from ESS BIZTOOLS to assist accountants to “future proof” accountancy businesses, please do not hesitate to contact us:
For more information please log onto www.essbiztools.com.au/silver package.
FREE article
Click here for a complimentary copy of the ESS BIZTOOLS’ free article “Future Proofing Your Accountancy Business Using ESS BIZTOOLS Silver Package”.
If you have any questions on any aspects of the products and services being produced by ESS BIZTOOLS to assist accountants to “future proof” your businesses, please do not hesitate to contact us – or telephone 1800 232 088.
Have a great day!
Peter Towers
