Tax Incentives for Early Stage Investors
Investors, it’s time to check if you’re eligible for tax incentives! If you invest in an Early Stage Innovation Company (ESIC) under Australian law, you may be eligible for a tax offset equal to 20% of your investment amount and other tax incentives.
Here’s an overview of how these incentives work and what you need to know:
Non-Refundable Tax Offset
This tax incentive for early stage investors also known as, ‘angel investors’ means investors may be eligible for a reduction equal to 20% of their investment.
This tax offset is non-refundable meaning it can reduce the investor’s tax bill. If the offset is greater than their tax liability, the excess can be carried forward to future years. There is also a cap on this offset: investors can claim up to $200,000 in tax offsets per income year, including investments made by both the investor and any affiliates.
Modified Capital Gains Tax (CGT) Treatment
This tax incentive means that if an investor invests in a qualifying ESIC and holds the shares for at least 12 months but less than 10 years, they will not have to pay the capital gains tax on any profit from selling those shares. However, if the investor incurs a loss on those shares within the same period, they cannot use that loss to offset other capital gains.
Key Takeaways
These incentives are designed to encourage investment in innovative startups by offering significant tax benefits to early stage investors. Investors must ensure they meet the eligibility criteria, including any investment caps to take full advantage of these benefits.
If you’re considering investing or are currently investing in a qualifying ESIC, these tax incentives can help significantly reduce your tax liability. For guidance on qualification, investment analysis and strategy planning please reach out to our friendly team. We provide personalised advice based on your specific situation, financial goals, investment portfolio and tax position.
Let us help you optimise your benefits and ensure compliance with tax regulations, reach out to Simmons Livingstone on 1800 618 800 or via email at admin@simmonslivingstone.com.au.
