All about innovation

What about IPO? or PL to Limited Conversion?

2019-04-10 18:27:03



We were recently asked 'What happens when my ESIC is listed on the ASX?' or ‘What happens when my ESIC converts from a Private into a Public Company?’

These seem like good problems to have, though it’s natural for early stage investors to become anxious, after all, they are the ones who have to prove any claim.

ESIC policy contemplated capital gain, so it should not come as a surprise to find that the tax rules do not differentiate these changes as the company progresses from strength to strength. ESIC status is established at the point of investment, not at exit.

Simply put, with all other things being aligned, the established prior ESIC status remains, and assuming the concession applies, and timing rules are met, then the taxpayer can disregard the capital gain.

*The 12 month holding rule, 10 year limitation and eligibility of the investor.

Savvy investors would be wise to review proofing documentation and or consider a private binding ruling, if they have not done so already.





Published By: Matthew at ESIC Directory

Early Stage Test - Are you a listed company?

2019-04-10 18:13:33



We often find that founders overlook the early stage tests in a rush to confirm they have sufficient points to qualify as an ESIC, though even professionals can jump to conclusions based on intuition or cognitive bias.

One good example of this is the hurdle regarding prior listing. Conservative advisers may assume that listing includes listing by proxy, i.e. ownership via a listed entity along similar lines to the rules that apply in the Corporations Act, though careful review of ATO guidance indicates otherwise.

ATO rulings have taken a more direct interpretation of listing, applying it directly to the company itself, i.e. the threshold is simply 'has this company listed'.

You may argue that this is not within the spirit or policy intent, though others would counter that the overarching goal of incentivised innovation is encouraged.

We'll be watching closely to see how the upcoming Tax Determination handles this issue and recommend that companies with listed company backing take the precautionary step of obtaining a ruling.



Published By: Matthew at ESIC Directory

Genuine IP

2019-02-19 17:58:12



You may not think that your company structure has much to do with the act of developing an innovation for commercialisation, though think again. 

The ATO recently confirm that subsidiary company would not satisfy the commercialisation limb of the first principal test, 'developing a new and or significantly innovation' as the company itself did not pass the hurdle. 

It seems unlikely, however it’s not uncommon for R&D to be claimed in a holding or IP company, with the trading and fundraise in another. 


  Since the Company does not own the IP it is not genuinely focussed on developing the supplements for commercialisation. Although it operates in conjunction with SubCo and provides funding, this is insufficient to be considered to be genuinely focussed on developing the innovation

The view was expressed in a private binding ruling, so technically it does not apply to all taxpayers, though we can confirm that this is not the first time the issue has arisen and on prior advise the opinion was the same.


Published By: Editor

Join the Crowd

2018-07-31 08:29:40



Welcome news, as ASIC issues the first batch of licences allowing seven intermediaries to help small and innovative companies to raise funds from a crowd of investors, following commencement of the Government's equity crowdfunding framework in September 2017.

This framework, has removed regulatory barriers inhibiting Australian entrepreneurs from obtaining the growth capital they need to turn good ideas into commercial successes. 

Consistent with ASIC's approach of batching licence applications, the first batch of crowdfunding intermediary licences has been issued to: Big Start, Billfolda, Birchal Financial Services, Equitise, Global Funding Partners, IQX Investment Services and On-Market Bookbuilds. The Government looks forward to more new entrants.

Companies will now be able to raise funds through offers hosted by these intermediaries, with the first offers expected to be available shortly.

Eligible public companies will be able to raise up to $5 million in funds through equity crowdfunding, with retail investors able to invest up to $10,000 per issuing company per year.

More information on the existing CSEF regime for public companies is available on the ASIC website.

The equity crowdfunding regime complements the tax incentives for angel investors in start-ups, the introduction of Open Banking and development of an enhanced regulatory sandbox for new and innovative FinTech products and services.

Good news!


Published By: TOM

Getting ready for an ATO ruling

2017-11-21 13:04:56



Faced with standoffish investors, many companies are considering an ATO private ruling to confirm that they qualify as an early stage innovation company (ESIC).

Whilst a ruling would be based on the facts at a given point of time (like our indicative listings), the appeal of the regulatory approval is obvious.

So what sort of things are needed and should I take that approach with my company?
Some of the details are require include;

- Group structure;
- Financial statements of the company and any '100% owned subsidiaries'; 
- Intellectual property or provisional/granted patents relevant to the company;
- Current documentation, including; 
      Business plan, inc;
             - description of the innovation being developed
             -  evidence of steps or activities taken and proposed in commercialisation 
             - timeline
             - competitor analysis (comparative) 
- Prior year Company Income Tax Return(s)
- Details as requested by your assessors

Essentially the Private Binding Ruling (PBR) is a mini audit, so don't expect to convert the ATO staff into seed investors. All though, equally you may be surprised to find that they are keen to work with you towards an outcome, particularly if you've done the required groundwork.

But why wouldn't you do an ATO PBR?
- Time.... (expect 6-18 weeks depending on how well prepared you are, and how complex it the innovation is)
- Cost....  (expert advice isn't free, and going it alone is problematic and could be very costly)
- Options (what about the 100 points test! is AOK in the right situation)
- Failure  (yes, that's right, you could fail a PBR on the principals test)

The last point is of interest particularly due to the tendency for firms to believe that they are the only ones innovating when in reality the market is quickly moving and pinning down a potential advantage is less important than growth. If that sounds like you, then a PBR could be a bad move, particularly when 100 points could be only a $50k investment and R&D claim away!

In any-case, we are keen to assist and happy to provide you a free interchange for investors and the company to keep track of your ESIC status whilst you get back to making the impossible happen!

You rule,



Published By: Tom