Early Stage Innovation Companies – Report due 31 July!
Did you know investors in Early Stage Innovation Companies do not pay capital gains tax on their investment for up to 10 years?
At The Macro Group we advise both Early Stage Innovation Companies and Investors on these incentives. Here are the highlights:
For Early Stage Innovation Companies
In order to qualify as an Early Stage Innovation Company, the company must meet the following tests:
- Be incorporated and registered with the Australian Business Register
- The company had total expenses of $1 million or less in the previous year.
- The company had assessable income of $200,000 or less in the previous year.
- The company is not listed on any Stock Exchange.
- The company meets either a 100 point innovation test or a principles-based innovation test.
Early Stage Innovation Companies need to report new investments in their company to the ATO by 31 July each year. This date is coming up, so it is important that if you believe your company may qualify as an Early Stage Innovation Company, you seek advice and submit the report to the ATO.
Investors who invest in an Early Stage Innovation Company obtain the following benefits:
- Receive 20% of the investment amount of up to $1 million as a non-refundable tax offset. This amount has a maximum offset of $200,000 for Sophisticated Investors. Smaller concessions also apply for investors who do not meet the Sophisticated Investor test.
- Capital gains on qualifying investments are ignored if the investment is sold after 12 months but before 10 years.
In order to qualify for the benefits, there are a number of conditions you must meet. Primarily the investment needs to consist of newly issued shares representing less than 30% of the equity. There are also certain rules which group affiliates that may affect your eligibility as an investor.
If you believe you have invested in an Early Stage Innovation Company, please let us know so we can include the credit on your tax return.
Please call or email us to discuss with a Macro team member today.