Empowering SMEs (Issue 038)
When the then Australian Prime Minister, Malcolm Turnbull announced the Coalition Government’s Innovation Policy in December 2015 he indicated that two new types of corporate entities would be established.
These entities were:
An Early Stage Innovation Company status can grant to eligible investors the opportunity to be able to claim a tax rebate on the value of their investment (subject to limitations) and these original investors may be entitled to avoid Capital Gains Tax on their initial investment in the company.
If the company has developed a new product, process, service, marketing or organisational methods and:
If the company has passed this series of tests the company may then move into the following tests:
If the company has undertaken various activities it can earn points. If the points earned exceed “100” the company can qualify under the “Gateway Test”.
Points can be earned from:
Research and development expenditure
If the company fails to qualify under the “Gateway Test” it may then utilise the “Principles Based Test” to determine whether the company might be eligible to be deemed an Early Stage Innovation Company.
The “Principles Based Test” requires 5 questions to be answered positively if the company is going to be able to qualify under the Principles-based Test. These questions relate to:
The test requires the company to be able to substantiate its answers to each of these questions. The Taxation Office encourages companies to submit answers to these questions together with supporting evidence to the Australian Taxation Office for a ruling as to whether the company qualifies as an Early Stage Innovation Company.
Benefit For Investors
There are 2 categories of investor for an Early-Stage Innovation Company:
The tax rebate is 20% of the investor’s investment in the company up to the investment category limit (this means that the maximum tax rebate for a retail investor is $10,000) and the maximum tax rebate for a sophisticated investor is $200,000.
Exemption From Capital Gains Tax
The exemption applies to the original owners of the shares if they hold the shares in the company for longer than 12 months and less than 10 years there is no capital gains tax paid on the sale of the shares.
Click here if you wish to learn more about Crowd Sourced Funding Equity Raising or go to our website: www.esssmallbusiness.com.au/crowdsourcedfunding/learnmore
We have discounted our Crowd Sourced Funding Equity Raising Products by 40% for the month of July 2019, please click here to view our special.
If you have any questions, please send and email to firstname.lastname@example.org or telephone Peter on 1800 232 088.
COMPLIMENTARY MATERIAL Click on the button below to access the following FREE material:
Episode 038 - Early Stage Innovation Company – a “Cousin” Entity to a Crowd Sourced Funding Equity Raising Company
If you wish to receive future editions in the Survival Hints for Small Business series, you can visit our iTunes – Podcasts - Survival Hints for Small Business page and subscribe to our podcasts. If you have any questions or suggestions on future items to be covered in Survival Hints for Small Business, please don’t hesitate to contact us.