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
- a 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
To qualify for the tax incentives, investors must have purchased new shares in a company that meets the requirements of an ESIC immediately after the shares are issued. The shares must be issued on or after 1 July 2016.
Qualifying as an early stage innovation company
For an investor to be entitled to the tax incentives, the company must qualify as an early stage innovation company (ESIC) immediately after the new shares are issued to the investor. If the company no longer meets the ESIC requirements after this test time, this won’t affect the investor’s entitlement to the early stage investor tax incentives.
A company will qualify as an ESIC if it meets both the early stage test and either the 100-point innovation test or principles-based innovation test.