For early stage innovation companies (ESICs)
Can a company request a ruling on the tests?
Companies may choose to apply for a ruling from the ATO about whether they meet the principles-based innovation test. We may need to consult with the Department of Industry, Science, Energy and Resources when providing the ruling.
The ruling is only about how the tax law applies to the facts that you have provided – if the facts change, this may lead to a different outcome under the tests.
The ruling should not be used in promotional materials to imply that we guarantee or endorse investment in your company.
The promoter penalty laws may apply if you use a ruling to encourage investors to invest in your company, when the company's circumstances at that time are materially different to those covered by the ruling.
What do you need to report to us?
Companies are required to complete an early stage innovation company report if they issue new shares to one or more investors during a financial year that could lead to an investor being entitled to access the early stage investor tax incentives.
For each investment that you receive during the year that may give rise to an investor accessing the tax incentives, you should keep the following information to report to us:
- ABN, name and address for the investor (plus the date of birth for investors that are individuals)
- number of new shares issued to the investor
- amount paid for the new shares
- date the shares were issued
- percentage of shares in the company held by the investor immediately after the shares were issued.
When you submit the form, you are declaring that the company meets the requirements to be an ESIC for all of the reported investments. You will be asked to specify whether the 100-point innovation test or principles-based innovation test has been applied and whether you have received a ruling on your eligibility.
Submitting the form when you are aware that the company does not meet these requirements could result in penalties, including possible criminal penalties, under the tax law.
We use this information to assess whether investors qualify for these tax incentives. Providing this information early may help your investors to demonstrate to us that they are entitled to the early stage investor tax offset, if they lodge their tax return early.
If you are aware that a particular investor is not entitled to access the early stage investor tax incentives, then you should not include the details for that investor on the form. For example, this will be the case if the investor is an affiliate of yours, or if the shares are provided through an employee share scheme.
How do you report to us?
You must report the information to us 31 days into the following financial year (this is generally 31 July).
Companies need to report this information electronically. The Early stage innovation company report form is available in:
- Users must have the correct permissions set by their Administrator in Access Manager to view and lodge the form.
- The report may timeout after five minutes of inactivity.
- Do not use copy and paste.
- If you continually get a system unavailable error message when attempting to lodge, email us at R&DandVCLiaison@ato.gov.au for assistance.
- If you are an Online services for business user and cannot see the ESIC report in your online forms and you have checked you have the correct access permissions, email us at R&DandVCLiaison@ato.gov.au to arrange access.
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