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  • T9 Early stage investor 2018

    Are you entitled to claim an early stage investor tax offset?

    You may be able to claim the early stage investor tax offset if one or both of the following applies:

    • you are entitled to the early stage investor tax offset in 2017–18
    • you have an amount of unused early stage investor tax offset carried forward from a previous year.

    No

    Go to T10 Other non-refundable tax offsets 2018 or return to main menu Individual tax return instructions 2018.

    Yes

    Read below.

    You need to know

    To qualify for this tax offset there are requirements that need to be satisfied by:

    • you as the investor, and
    • the early stage innovation company.

    For more information on the early stage investor tax offset and the requirements to qualify for it, see Qualifying for the tax incentives.

    The maximum offset (including current year and carried forward prior year amounts) that you, and your affiliates combined, can claim in 2017–18 is $200,000.

    If you are a partner in a partnership or a beneficiary of a trust which has invested in an early stage innovation company during 2017–18, you may be entitled to an early stage investor tax offset. The partnership or the trustee of the trust must provide you with written notification of your entitlement to the early stage investor tax offset. If a written notification has not been provided, contact the partnership or the trustee.

    This tax offset is non-refundable, however you can carry it forward if it is not fully utilised in 2017–18. Any amount of unused tax offset able to be carried forward will be shown on your notice of assessment for the year ended 30 June 2018.

    Working out your tax offset carried forward from a previous year

    Your notice of assessment or amended notice of assessment for the year ended 30 June 2017 should show if you have any unused early stage investor tax offset that is carried forward to 2017–18.

    Do you have an amount of unused early stage investor tax offset shown on your notice of assessment or amended notice of assessment for the year ended 30 June 2017?

    No

    Go to Working out your 2017–18 tax offset.

    Yes

    Read below.

    The unused early stage investor tax offset carried forward from the previous year may need to be adjusted for any net exempt income. Exempt income is explained in Amounts that you do not pay tax on 2018.

    The unused early stage investor tax offset carried forward from a previous year is reduced by 30 cents for every dollar of unused net exempt income, provided you had taxable income for that year. Unused net exempt income is any net exempt income left after deducting any tax losses of earlier income years from that year's net exempt income.

    If you have unused net exempt income and are unsure how to calculate the early stage investor tax offset carried forward from a previous year, phone 13 28 61 for more information. Otherwise, read on.

    The amount of your unused early stage investor tax offset will help you to complete Step 5 when working out your 2017–18 tax offset.

    Working out your 2017–18 tax offset

    Step 1

    Work out the total amount you paid for eligible shares in all early stage innovation companies in 2017–18.

    If you do not meet the requirements of the 'sophisticated investor' test for at least one of your 2017–18 investments in an early stage innovation company, your step 1 amount must not exceed $50,000. If your step 1 amount exceeds $50,000 you cannot claim this offset.

    Step 2

    Multiply the amount from step 1 by 20%.

    Step 3

    Identify your entitlements to any early stage investor tax offsets as a beneficiary of a trust or a partner in a partnership that has invested in an early stage innovation company during 2017–18.

    Step 4

    Add together the amounts from step 2 and step 3.

    Step 5

    Subtract from $200,000 the amount (if any) of unused early stage investor carried forward tax offset that you calculated in Working out your tax offset carried forward from a previous year.

    Step 6

    If the step 4 amount is equal to or less than the amount worked out at step 5, then the step 4 amount is your 2017–18 tax offset.

    If the step 4 amount is greater than the step 5 amount, then the step 5 amount is your 2017–18 tax offset.

    Your 2017–18 tax offset amount may need to be further reduced if any of your affiliates are entitled to the early stage investor tax offset (whether for investments they made in 2017–18 or carried forward from 2016–17.

    The maximum offset (including current year and carried forward prior year amounts) that you, and your affiliates combined, can claim in 2017–18 is $200,000.

    Example

    Example: Calculating your current year tax offset if you have an amount of tax offset carried forward from the previous year

    Alex has a carried forward early stage investor tax offset of $60,000 from 2016–17.

    In 2017–18, Alex invested $500,000 in eligible shares in one early stage innovation company, and $250,000 in another. Alex meets the requirements of the sophisticated investor test for the investments. The tax payable on Alex's taxable income (before applying tax offsets) is $180,000. Alex has no other offsets and no exempt income.

    The amount that is recorded at O is $60,000. Alex calculates the amount to report at L as:

    Step 1: The total amount paid for eligible shares in early stage innovation companies in 2017–18 = $750,000.

    Step 2: Multiply the step 1 amount ($750,000) by 20% = $150,000.

    Step 3: Nil – Alex has no other early stage investor entitlements via trusts or partnerships.

    Step 4: Alex adds the amounts from steps 2 and 3. The result is $150,000.

    Step 5: Alex subtracts the amount at O, $60,000, from $200,000. The result is $140,000.

    Step 6: As the step 4 amount ($150,000) is greater than the amount worked out in step 5 ($140,000), Alex writes $140,000 at L.

    Alex can claim an early stage investor tax offset equal to the sum of the L and O amounts ($60,000 + $140,000, totalling $200,000). Although the carried forward tax offset from 2016–17 of $60,000 and the current year tax offset of $150,000 (step 4 amount) equal $210,000, Alex's total tax offset is capped at $200,000 for 2017–18. The unused excess of $10,000 cannot be carried forward to 2018–19.

    As Alex's entitlement to the tax offset ($200,000) is greater than the gross tax payable on taxable income ($180,000), the unused portion of the tax offset ($20,000) may be carried forward to future years.

    End of example

    Completing this item

    Write the result from Step 6 at L item T9. Do not show cents.

    Write the amount of unused early stage investor tax offset carried forward from the previous year, reduced by any net exempt income, at O item T9. Do not show cents.

    Additional Information

    For more information on the early stage investor tax offset and the requirements to qualify for it, see Qualifying for the tax incentives.

    Where to go next

      Last modified: 31 May 2018QC 54295