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Early Stage Innovation Company Private Rulings
Unlock tax offsets and CGT relief for potential investors in your early stage innovation company
MJA simplifies ESIC private rulings, ensuring compliance and guiding your business through the process with expert support. Discover more today
Enhance Your Funding Strategy with MJA’s ESIC Expertise
ESIC offsets are tax incentives designed to encourage investment in Early Stage Innovation Companies (ESICs). Investors who purchase new shares in a qualifying ESIC (early stage in most circumstances being less than 3 years old) can receive a non-refundable tax offset equal to 20% of the amount invested, up to a maximum of $200,000 per year. This offset can reduce the investor’s tax payable, and any unused offset can be carried forward to future years. Additionally, investors may benefit from modified capital gains tax (CGT) treatment on their investment, with no CGT payable on gains realised between 1 and 10 years after acquiring complying shares.
MJA’s ESIC consulting services are specifically designed to help potential Early Stage Innovation Companies determine whether they are able to meet the initial requirements and guide them through either the 100-point innovation test or the principles-based test. If a company doesn’t meet the 100-point test, MJA can prepare the necessary documentation and commentary for the principles-based test and submit the private ruling application to the ATO on your behalf.
Does your Company Qualify as an ESIC? Ask us!
MJA serves a diverse range of industries, tailoring our ESIC services to meet your unique needs. By ensuring eligibility and streamlining the ESIC private ruling process, we help companies in these sectors, and those providing them with technical services, attract investors seeking to capitalise on ESIC offsets. Industries we consult in include:
Technology
Assisting tech startups in securing ESIC status to attract early-stage investors and drive innovation.
Manufacturing
Supporting new manufacturing companies in meeting ESIC criteria to foster advancements in production technologies.
Energy
Supporting start up energy and energy storage companies in obtaining ESIC private rulings to secure investor funding for renewable energy projects and technologies.
Biotechnology
Guiding start up biotech firms through the ESIC determination process, including applying for private rulings to attract investor capital for medical and scientific research.
Finance (Fin Tech)
Assisting new financial services firms and companies who provide technical services to them in leveraging ESIC incentives to innovate and expand their offerings.
Healthcare and Medical Devices
Helping healthcare companies navigate ESIC requirements to assist in raising investor funds fund groundbreaking medical research and development.
Agriculture (Ag Tech)
Guiding new formed agricultural businesses and companies who provide technical services to them through the ESIC process to promote sustainable farming innovations.
How We Work
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Initial Consultation
MJA meets with you to understand your innovation goals, funding needs, and project scope.
Eligibility Assessment
MJA evaluates whether you meet the necessary criteria to be considered an ESIC and will be issuing new equity shares in your company.
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Strategy Development
MJA works with the you to align your funding strategies with specific government incentives, grants, and investment programs. This ensures the company’s goals are met while complying with ESIC requirements and positions your company for investment.
Application Preparation
MJA collects all the necessary documentation, including financials, project details, and innovation information and prepares a written argument for a Private Ruling application on the Principles test
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Application Submission and Management
MJA ensures the timely submission of the private ruling application and the associated attachments to enable the ATO to make a ruling.
Post-Submission Support
MJA provides ongoing support after submission of the private ruling application. We offer proactive solutions if any issues arise, ensuring continuous support.
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How Does ESIC work?
To qualify as an ESIC, a company must meet these requirements:
- Early Stage Test: Incorporated in Australia within the last 3 income years or registered in the Australian Business Register within the last 6 income years, with expenses not exceeding $1 million in any of the last 3 income years.
- Innovation Test: Meet either the 100-point innovation test or the principles-based innovation test:
- 100-Point Innovation Test: Points based on criteria like receiving an Accelerating Commercialisation Grant, having a registered patent, or a certain percentage of R&D expenditure.
- Principles-Based Innovation Test: Demonstrate focus on developing and commercialising new or significantly improved products, services, processes, or methods for a global market
Having a Private Ruling on the eligibility of your company as an ESIC gives certainty to your investors that they can access the favourable tax treatment on both acquisition (20% tax offset) and sale of complying shares (CGT relief).
Establish Your ESIC Eligibility Now!
Email Melanie Reen for our Company and Investor ESIC Fact Sheets
Frequently Asked Questions
What is an ESIC private ruling?
An ESIC private ruling is a formal request to the Australian Taxation Office (ATO) to confirm a company’s status as an Early Stage Innovation Company (ESIC). This helps ensure the company meets the criteria to qualify for tax incentives aimed at early-stage investors.
How does MJA assist with the ESIC private ruling process?
MJA assists by evaluating your company’s eligibility, preparing the necessary documentation, and submitting the private ruling application to the ATO. They also provide ongoing support throughout the process.
What are the eligibility requirements for ESIC status?
To qualify as an ESIC, a company must meet the early stage test and either the 100-point innovation test or the principles-based innovation test. These tests assess the company’s age, expenditure, and innovation activities.
What is the 100-point innovation test?
The 100-point innovation test is an objective test where a company accumulates points based on various innovation-related criteria, such as receiving an Accelerating Commercialisation Grant or having a registered patent.
What is the principles-based innovation test?
The principles-based innovation test is a subjective test that requires demonstrating the company is genuinely focused on developing and commercialising for a global market new or significantly improved products, services, processes, or methods. The company must show that the product being developed has significant competitive advantages, and that the company has the resources to deliver on its objectives.
What are the benefits of obtaining ESIC status?
Obtaining ESIC status allows a company to offer tax incentives to early-stage investors, including a non-refundable tax offset of up to $200,000 and modified capital gains tax (CGT) treatment on their investments.
How long does the ESIC private ruling process take?
The duration of the ESIC private ruling process can vary, but it typically takes several weeks to a few months, depending on the complexity of the application and the ATO’s workload.
Can MJA help if my company doesn't meet the 100-point test?
Yes, MJA can assist by preparing the necessary documentation and commentary for the principles-based test, increasing the chances of a successful private ruling application.
What documentation is required for an ESIC private ruling application?
Required documentation includes detailed information about the company’s innovation activities, financials, and any supporting evidence that demonstrates compliance with ESIC criteria, such as market research, business plans and/or information memoranda
How can I get started with MJA's ESIC consulting services?
You can get started by contacting MJA for an initial consultation, where we will assess your company’s eligibility and outline the steps needed to determine your eligibility and if necessary apply for an ESIC private ruling.
What fees does MJA charge for assisting companies and investors with ESIC applications?
Your initial consultation will be at no charge. If you are only able to meet the eligibility requirements using the principles test, we recommend a private ruling application to give investors in your company certainty. We charge a fixed rate to lodge the application, based on the length of time it typically takes to undertake the exercise. We charge hourly rates for any ongoing work needed to progress the application with the ATO (if any).
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