Early Stage Innovation Company (ESIC) – Know to Save Tax

Investing in Early Stage Innovation Companies (ESICs) not only supports innovation in Australia but also provides significant tax benefits to investors. These incentives, introduced by the ATO, aim to encourage investments in startups that meet specific eligibility criteria. Here, we’ll explore what an ESIC is, the available incentives, how to claim them, and how Gild can assist with the process.

 What is an Early Stage Innovation Company (ESIC)? 

An Early Stage Innovation Company (ESIC) that meets ATO criteria on either a 100-point basis or Principles Test contained in Div360 of the Income Tax Assessment Act 1997.

 Why Are ESIC Tax Incentives in Place? 

To encourage investment in Early Stage Companies that are involved in innovation in Australia.

 What Incentives Are Available for ESIC Investors? 

• non-refundable carry forward tax offset equal to 20% of the amount paid for their eligible 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 12months and less than 10years may be disregarded. Capital losses on shares held less than 10years must be disregarded.

How to Claim ESIC Tax Incentives 

In order to claim the incentives the ESIC needs to upload company details and details of eligible shares issued during the financial year by 31 July in the following year. Investors will need to let the company know of their intent to opt in after which the company. The company can lodge the report using their ATO Business portal access or contact their tax agent to lodge on their behalf.

When Are ESIC Reporting Deadlines? 

31 July following the financial year in which eligible shares are issued.

How Can Gild Help You with ESIC? 

We can walk you through the eligibility requirements, assist with the information collation and lodgment process and lodge on your behalf. Reach out to your account manager if you think you might be eligible.