Billfolda

What is ESIC?

Eligible Investors who invest in Billfolda ESICs may be eligible for a 20% tax offset and tax exemption on capital gains from the sale of any investment held for between 1 to 10 years.

From 1 July 2016, if you invest in a qualifying Early Stage Innovation Company (ESIC), you may be eligible for tax incentives. Eligible retail investors can be entitled to a maximum of $10,000 in tax offsets from eligible ESIC investments per year, whereas sophisticated investor are capped at a maximum amount of $200,000 for each income year.

Retail investors who exceed the annual cap become ineligible on the full amount of investment that year. How else can I fail to qualify?

Not everyone can qualify for the tax inventive, please review these exceptions and consult your tax accountant.

The early stage investor tax incentives will not be available to you if:

  • you are a widely held company or a wholly-owned subsidiary of a widely held company.
  • your total investment in one or more ESICs for the income year is more than $50,000 and you didn't meet the sophisticated investor test in relation to at least one of those share offerings.
  • you or the ESIC are affiliates of each other at the time the shares are issued you hold more than 30% of the equity interests in the ESIC (including any entities connected with the ESIC) immediately after you are issued with the new shares.

The early stage investor tax incentives are available to Australian resident and non-resident investors.

Can an entity invest?

If the investor is a trust or partnership, special rules apply so that the entitlement to the tax offset flows through to the member of the trust or partnership (expert advice is required). If the investor is a superannuation fund, the trustee of the fund and not the fund members, will be entitled to the tax incentives (tax offset and the modified CGT treatment).

What if the company is no longer an ESIC?

Sometime after your investment the company is likely to cease being an eligible ESIC, however this won't affect your investor's entitlement to the early stage investor tax incentives for the shares, as you invested at the time it was.

To help confirm this, we strongly recommend that you keep the Billfolda ESIC investor pack to assist your accountant and the ATO in the event of a review.