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Wednesday, 23 August 2017

The Australian Tax Office (ATO) has announced because of its IT outages and consequent difficulties experienced by tax professionals and their clients, the deadline for lodging the Early Stage Innovation Company (ESIC) form has been extended to 31 August 2017.

ESIC qualifying companies were originally due to report their 2016-17 results by 31 July 2017.

From 1 July 2016, investors in qualifying early stage innovation company (ESIC), became eligible for tax incentives.

The tax concessions for early stage investors (sometimes referred to as 'angel investors') are contained in Division 360 of the Income Tax Assessment Act 1997.

The tax concessions 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
- 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.

The maximum tax offset cap of $200,000 doesn't limit the shares that qualify for the modified CGT treatment.

Investors who don't meet the 'sophisticated investor' test under the Corporations Act 2001 are not eligible for the tax incentives if their total investment in qualifying ESICs in an income year is more than $50,000.

ESIC reports should be made on the ESIC form on the Tax Agent Portal to report qualifying investments made in an ESIC clients' company.

The report includes:
- details for each investor, including ABN (if applicable)
- how many newly issued shares were purchased, and when they issued
- amount paid for the new shares
- the percentage of shares in the company the investor held immediately after the shares issued.


Click below to view source

ATO: Early stage innovation companies reporting

ATO: Tax incentives for early stage investors

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