I want to talk to you today about 2 important tax incentives easily accessible for you:
The first one is 20% Tax offset on investment you put in a start-up Early Stage Innovation Company ESIC.
The second is Capital gain exemption after selling ESIC shares held for more than a year
I will explain now in more details:
Early Stage Innovation Company is usually a start up with high growth potential. Many of these have innovation capabilities or ideas that need funding.
This is why the 20% Tax offset is a measure to encourage entrepreneurs invest in ESIC and help innovative companies get the required funding for their innovation.
This means when you invest and buy shares in an ESIC, you get 20% back as a Tax offset that you can use same year or carry-it forward for future years.
There is a limit on how much you can invest per year with ESIC.
If you are a Sophisticated Investor you can invest up to $200,000 a year, meaning your tax offset will be $40,000.
If you are not a sophisticated investor, you can invest up to $50,000 a year and get $10,000 back in Tax offset.
However, you won’t qualify for the ESIC tax offset if have more than 30% interest in the ESIC company. This gives you control, and you’re most likely considered to be one of the owners or founders.
The 20% ESIC Tax offset is now a good tax planning strategy that helps you build a tax effective investment portfolio.
Another great tax incentive with ESIC investments is the CGT exemption. If you hold the ESIC shares between 1 to 10 years, you will be exempt from paying tax on Capital gain from sold ESIC shares.
I hope I was able to open your eyes on a great tax saving opportunity today.
If you have any questions, please put them in the comments below and let me know what you think of these tax incentives!