ESIC Reporting Obligations for Start-Ups

ESIC Reporting Obligations for Start-Ups

Please be aware that Early Stage Innovation Companies (ESIC) 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. This information must be reported to the ATO 31 days into the following financial year (which is generally 31 July).

It is not the responsibility of an accountant or tax agent to complete this report. Clients are expected to do this report themselves or engage a company secretary for help.

What do you need to report?

For each investment that you receive during the year that may give rise to an investor accessing early-stage investor tax incentives, you should keep the following information to report to the ATO:

  • 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 declare that the company meets the requirements to be an ESIC for all reported investments. You will be asked to specify whether the 100-point innovation test or principles-based innovation test has been applied as well as 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.

The ATO will use this information to assess whether investors qualify for the tax incentives. Providing this information early on may help your investors demonstrate to the ATO 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 that investor’s details 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?

Companies need to report this information electronically. The Early Stage Innovation Company report form is available in:

Lodgment tips

  • 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 R& 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 R& to arrange access.

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