• Skip to content
  • Skip to navigation

Grant Thornton Australia

Grant Thornton uses cookies to monitor the performance of this website and improve user experience.

If you are happy to accept cookies from this site, please check the box.

To find out more about cookies, what they are and how we use them, please see our privacy notice, which also provides information on how to delete cookies from your hard drive.

How to be COVIDSafe when visiting Grant Thornton offices. Find out how

Global site
  • Global site
Grant Thorton Logo

Grant Thornton Logo Grant Thornton Logo

Contact us
  • Insights
  • Services
  • Industries
  • Meet our people
  • Careers
  • News centre
  • Locations
  • About us
  • Audit
  • Tax
  • Risk
  • Forensics
  • Deals
  • Finance and funding
  • Insolvency
  • Restructuring and turnaround
  • Business services
  • Consulting

  • Market services
  • Asia
  • Indigenous advisory
Audit Home
  • Compliance audits & reviews
  • Audit quality
  • Financial reporting advisory
  • Audit advisory
Tax Home
  • Corporate tax & advisory
  • Private business tax & advisory
  • Tax compliance
  • Employment tax
  • International tax
  • GST, stamp duty & indirect tax
  • Tax law
  • Research and development & government incentives
  • Data transformation and analytics
  • Corporate simplification
Risk Home
  • Payroll assurance
  • Cyber resilience
  • Internal audit
  • Financial crime
  • Consumer Data Right
  • Risk management
  • Controls assurance
  • Governance
  • Regulatory compliance
Forensics Home
  • Forensic accounting and dispute advisory
  • Investigations
  • Digital forensics
  • eDiscovery
Deals Home
  • Mergers and acquisitions
  • Acquisition search & strategy
  • Divestments
  • Operation deal services
  • Transaction advisory
  • Business valuations
  • Tax in mergers & acquisition
Finance and funding Home
  • Corporate finance
  • Debt advisory
  • Working capital optimisation
  • Capital markets
  • Capital raising
  • Private equity
  • Financial modelling
  • Payments advisory
Insolvency Home
  • Voluntary administration & DOCA
  • Corporate insolvency & liquidation
  • Complex and international insolvency
  • Safe Harbour advisory
  • Bankruptcy and personal insolvency
  • Creditor advisory services
  • Small business restructuring process
Restructuring and turnaround Home
  • Independent business reviews
  • Commercial performance
  • Safe Harbour advisory
  • Corporate simplification
  • Director advisory services
  • Debt advisory
Business services Home
  • Business planning & strategy
  • Private business company secretarial services
  • Outsourced accounting services
  • Superannuation and SMSF
  • Management reporting
  • Financial reporting
  • Forecasting & budgeting
  • ATO audit support
  • Family business consulting
  • Private business taxation and structuring
  • Outsourced CFO services
Consulting Home
  • Management consulting
  • Technology consulting
  • Financial consulting
Asia Home
  • China
  • India
  • Japan
  • Case study: Restructuring solutions
  • Agribusiness, food & beverage
  • Automotive dealers
  • Education
  • Energy & resources
  • Financial services
  • Health & aged care
  • Life sciences
  • Manufacturing
  • Not for Profit
  • Professional services
  • Public sector
  • Real estate & construction
  • Retail & consumer products
  • Technology & media
Agribusiness, food & beverage Home
Bite Size Dealtracker Food, Beverage & Agribusiness industry insights
Key insights for the Australian Food, Beverage & Agribusiness industry.
Financial services Home
  • Banking
  • Fintech
  • Private Health Insurance
  • Superannuation
  • Asset management
  • BEAR FAQs
  • Open banking
Royal Commission wrap up Top 10 things for Financial Services providers
Eleven months on from the first round of hearings for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Commissioner Hayne’s final report has been released.
Health & aged care Home
Aged Care Royal Commission Perspectives on the Future of Ageing
Transitions in ageing are not consistent and systematic as they are described by our ageing systems. Sometimes they are incremental, sometimes accidental, sometimes monumental, and they are always personal. We can create something better.
Life sciences Home
Biotechnology Industry Position survey Australia's biotechnology industry drives economic growth
The 2019 Biotechnology Industry Position survey conducted by Ausbiotech and supported by Grant Thornton has revealed that new technologies across regenerative medicine and medicinal cannabis are disrupting the industry, and Australia's global strength in clinical trials continues to drive contributions to the economic and social fabric of the country.
Manufacturing Home
mid-sized business report Manufacturing is critical to our economy – how can we support the sector?
Although the knock-on effects of the Australian automotive industry exiting our country are yet to be fully understood, the industry is evolving, and manufacturing continues to be a major employer and critical to our overall economy.
Not for Profit Home
NATIONAL OUTCOMES MEASUREMENT PROGRAM A practical framework
Royal Commissions and federal budgets are critical things for Nonprofit human service providers to be thinking about at this point in time.
Real estate & construction Home
mid-sized business report Supporting affordable housing requires planning, certainty – and tax reform
There is a lot of noise around the property sector at the moment – and it’s not all positive. Prices are down – but this shouldn’t be a surprise when some markets (namely Sydney & Melbourne) saw unprecedented hikes in recent years.
Retail & consumer products Home
GNC Group Consulting The Technology Trap: Online innovation in retail
I recently attended the NRF Retail Big Show in New York, an overwhelming smorgasbord of retail technology and new store concepts.
Technology & media Home
  • Telecommunications
Scaling-up for Growth From start-up to scale-up
Navigating the complexities of growth and maintaining previous success is a challenge for all mid-size businesses.
  • Working at Grant Thornton
  • Student opportunities
  • Experienced careers
  • Contact us
Working at Grant Thornton Home
  • Flexibility
  • Your career and development
  • Diversity and inclusion
  • In the community
  • What we offer you
Student opportunities Home
  • Graduates
  • Vacationer Program
  • The application process
  • FAQs
  • Student application tips and tricks
  • Positions available
Experienced careers Home
  • Client spotlight
  • Positions available
  1. Grant Thornton Australia | Audit, Tax and Advisory
  2. Client alerts
  3. 2020
  4. Australian tax incentive assisting Early Stage Innovation Companies (ESICs) to attract funding

Australian tax incentive assisting Early Stage Innovation Companies (ESICs) to attract funding

11 Feb 2020
  • Australian tax incentive assisting Early Stage Innovation Companies (ESICs) to attract funding

Many Early Stage Innovation Companies (ESICs) face stiff competition for investor capital. In response, and as part of the Science and Innovation Agenda, the Australian Government introduced the ESIC measures to incentivise investment in such companies.

ESIC regime – What is it and why is it so attractive?

The ESIC regime provides both short and long-term tax incentives to investors who acquire shares directly from ESICs, assisting in the funding of those companies.  

Short Term Incentives

  • Non-refundable - 20% tax offset for total annual investment in eligible ESIC (subject to thresholds which apply at different rates for “sophisticated” and “non-sophisticated” investors)

Long Term Incentive

  • Capital gains tax exemption for ESIC shares held for at least 12 months and less than 10 years (i.e. no capital gains tax if sold for a gain during this period). 
  • For ESIC shares that are held for a period greater than 10 years, an uplift in the tax cost base of the shares to the market value of the shares 10 years after acquisition.

How do you know if your company is ESIC eligible?

To be an eligible ESIC a company broadly needs to be an innovative company in its early stages with high-growth potential, a geographically broad offering and the ability to scale-up.

The tests to determine this are outlined below:

Early stage test

This test identifies whether or not a company is in its ‘early stages’. This is evidenced by a company’s previous year’s income and expenses, along with its date of incorporation or registration. The criteria can be found here.

Innovation test (only need to satisfy one)

  • 100-point test (objective) – To pass the 100-point test, a company is required to accumulate at least 100 points based on specific criteria determined to be indicative of an innovative company. Refer to this table provided by the ATO to determine whether your company is able to satisfy the specific criteria and accumulate at least 100-points; or
  • Principles-based test (subjective) – This test identifies if a company is developing a new or significantly improved innovation (product, process, service) to be commercialised (i.e. to generate income) and has high-growth potential with the ability to scale across a broad market. Due to the subjectivity in applying this test, it is good practice (and our recommendation) to obtain a Private Binding Ruling (PBR) from the ATO to confirm eligibility.

Our experience

We have undertaken a significant number of ESIC reviews for companies both under the principles-based test and the 100-point test. Some of our key findings to date are as follows:

  • The ATO is well aware that some companies implement contrived ‘schemes’ designed to enable them to be an eligible ESIC.
  • The ATO is keen to engage proactively with companies to determine their eligibility, particularly when companies engage under the PBR program.
  • Investors are demanding evidence from ESICs about how they have determined their eligibility.
  • The ATO views the ESIC measures as strictly applicable for companies ‘developing’ new or improved products, processes or, services and is alert to companies that have already developed their product, process or, service.

Depending on your specific circumstance we offer two options to help a company determine if they are an ESIC:

  1. Review Option: We can provide you a tailored template to assist with your documentation for support (generally a PBR application), review the document and manage correspondence with the ATO where required; or
  2. Preparation Option: We draft the support document, liaise with the ATO (where required) and submit the PBR on your behalf (where required).

We have contacts across Australia – so feel free to reach out to your local team lead.

ESIC incentives in practice

An individual who is a sophisticated investor invests $1m in a company, subscribing for newly issued shares. The shares are sold 5 years later for $2.5m. In the year of the sale, assume the investor has $1m of other net taxable income but no taxable income in the years prior. Let’s compare the outcomes of investing in a non-ESIC (Company A) and an ESIC (Company B) and then selling the shares later.

GTAL_2020_ESIC_Table.png

Grant Thornton Australia Contacts

New South Wales

Michael Catterall – Partner

P: +61 2 8297 2535

E: Michael.Catterall@au.gt.com

 

Queensland

Charl Van Den Berg – Manager

P: +61 7 3222 0351

E: Charl.VanDenBerg@au.gt.com

 

South Australia

Tom Paltridge – Partner

P: +61 8 8372 6686

E: Tom.Paltridge@au.gt.com

 

Victoria

Daniel Kave– Partner

P: +61 3 8663 6314

E: Daniel.Kave@au.gt.com

 

Western Australia

Mark Trewhella – Partner

P: +61 8 9480 2174

E: Mark.Trewhella@au.gt.com

 

Share this page
  • Share this page on Facebook LinkedIn
  • Share this page on Twitter Twitter
  • Share this page on LinkedIn LinkedIn
  • Share this page on Wechat WeChat
  • Share this page via email Email
  • Grant Thornton on Youtube
  • LinkedIn icon
  • Twitter icon
  • Facebook icon
Connectclose
  • Contact us
  • Locations
  • Meet our people
  • Subscribe
  • Staff portal
Aboutclose
  • About us
  • Careers
  • News centre
  • Client alerts
  • Grant Thornton Foundation
  • Grant Thornton Affinity
Legalclose
  • Privacy
  • Compliance and ethics
  • Disclaimer
  • Site map

© 2021 Grant Thornton Australia Limited – All rights reserved

    • EN
    • Contact us