Tax Concessions Associated with Early Stage Innovation Companies Under Review

There are generous tax incentives currently available which are designed to attract and encourage investment into early-stage Australian companies (i.e. Startups & ScaleUps). The Government has announced it will review these tax incentives.

These tax incentives include:

  • The Early Stage Innovation Company (ESIC) Tax Offset, which is a non-refundable carry forward tax offset equal to 20% of the amount invested into eligible ESICs, capped at a maximum tax offset of $200,000 each financial year.
  • Modified CGT treatment where capital gains made on qualifying shares that are held for at least 12 months and up to ten years may be disregarded (i.e. tax free!).

At the time of announcing the Budget the Government has not announced the timeline for this review.

Given the Federal Government’s broader Digital Economy Strategy, we anticipate the review is not designed to reduce these incentives, but is rather to improve these incentives in order to better satisfy the goal of enabling Australian Startups and ScaleUps to attract more investment capital.

Munro’s has experience providing advice and assistance to companies raising a Seed round, and should you require help confirming your ESIC status and thus encouraging investments into your startup, then please contact Mike Beer or Drew Pflaum. You’ll be pleased to have the backing of advisors familiar with this complex area of tax law.

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