Investing in Startups in Australia

There is a new tax incentive

DISCLAIMER

This is merely a slideshow for entertainment purposes and to share my personal excitement for this tax incentive for investment in startups in Australia. I am not qualified to give tax advice and it should not be construed to be tax advice. I researched The Australian Government’s Treasury website www.treasury.gov.au and turned the information into a slideshow. Any of the information is general in nature. People should seek professional advice in relation to their own unique circumstances and certainly not rely on any information in this slideshow. This slidehow is being made on 5 December 2016. The information may not be current in the future.

OverviewThe tax incentives have been available since 1 July 2016

OverviewTax credits may be available for funds invested in qualifying ESICs

Overview

Capital gains tax exemptions may apply for

* investors

* startup entrepreneurs

OverviewLimits to prevent ‘unsophisticated’ investors investing too much

Overview Caps for ‘sophisticated’ investors

Now for some details

Which Startups?Qualifying ESICs at the time of investment

ESIC?

Early

Stage

Innovation

Company

EarlyStageInnovation Company?

Check Treasury’s Website

for all the details.

See next 5 slides for summary.

EarlyStageInnovation Company?

● Not listed on any stock exchange

EarlyStageInnovation Company?

● Not listed on any stock exchange● Incorporated in Australia

EarlyStageInnovation Company?

● Not listed on any stock exchange● Incorporated in Australia● Satisfies innovation tests

EarlyStageInnovation Company?

● Not listed on any stock exchange● Incorporated in Australia● Satisfies innovation tests

In prior income year:

● Expenditure $1 million or less

EarlyStageInnovation Company?

● Not listed on any stock exchange● Incorporated in Australia● Satisfies innovation tests

In prior income year:

● Expenditure $1 million or less● Assessable income $200k or less

The investor?● invests in a qualifying ESIC

The investor?● invests in a qualifying ESIC

● is not a widely-held company; and

The investor?

● invests in a qualifying ESIC

● is not a widely-held company; and

● is either:

○ sophisticated investor

Sophisticated investor?

● a legal person controlled by an

individual considered a

sophisticated investor pursuant

to subsection 708(8) of the

Corporations Act 2001

The investor?

● invests in a qualifying ESIC

● is not a widely-held company; and

● is either:

○ sophisticated investor; or

○ a non-sophisticated investor

that has invested $50,000 or

less in the income year.

Non-sophisticated

Non-sophisticated investors BEWARE!

Non-sophisticated

Non-sophisticated investors BEWARE!

Invest >$50,000

There is a $50k limit to prevent too much money being risked

Non-sophisticated

Non-sophisticated investors BEWARE!

Invest >$50,000

There is a $50k limit to prevent too much money being risked

All benefits are lost

DON’T LET THIS HAPPEN

The purpose of these tax breaks?

● More investment in startups

The tax breaks?INCOME TAX

● 20% tax credit

The tax breaks?INCOME TAX

● 20% tax credit

● This is a non-refundable carry

forward tax offset

The tax breaks?INCOME TAX

● 20% tax credit

● This is a non-refundable carry

forward tax offset

● Capped at $200,000

The tax breaks?CAPITAL GAINS TAX

● A 10 year exemption on capital

gains tax for investments held as

shares in an ESIC for at least 12

months, provided that the shares

held do not constitute more than

a 30 per cent interest in the ESIC

The tax breaks?CAPITAL GAINS TAX

● A 10 year exemption on capital

gains tax for investments held as

shares in an ESIC for at least 12

months, provided that the shares

held do not constitute more than

a 30 per cent interest in the ESIC

● So this could apply to

entrepreneurs themselves

There’s more● As you would expect, there is

more small print, so it is time to

make your own enquiries

Benefits● More funding for startups

Benefits● More funding for startups

● Another option for investors

Benefits● More funding for startups

● Another option for investors

● And who doesn’t like a tax break

Next steps

Examine any startups with extreme cautionGet your own adviceProceed with care

Remember, this is general information, current in Australia on 5 December 2016.

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