We've been working hard to help early stage companies work on their taxation status, knowledge and qualification for the ESIC concession, and one area in particular has really started to gain momentum over the past few months. That's ATO Private Rulings.
Some argue that an ATO PR is a carrying the 'gold standard' as far as ESIC, however caution and skill is still required in obtaining one and or relying upon it.
Consider that ESIC status is 2 ways, firstly the company must be eligible, but also the investor. Failing by virtue of a close association with the startup, and or by acquisition or two many shares are just a couple of the trips that have caught correspondents to our service.
Thereafter you need to look at the ATO ruling in depth;
- A PR is only as good as the information provided (i.e. if the facts are wrong, the ruling will be invalid)
- the time the ruling applies (some only apply for a prior issue date of shares), others are limited to the 2016 tax year
- the time you will use the ruling (the clock is ticking through to the 30 June).
- subsequent events, e.g. a ruling based on the 2016-17 R&D spend
- a ruling or indeed any ESIC Status is no guarantee of an investment
- alternate qualification (many principals based rulings will be naturally superseded by points based qualification over time).
- disclosure by the company (all private rulings become 'depersonalised' public documents)
- subsequent audit of the investor (who is ultimately responsible for validating the ESIC claim)
Don't take it the wrong way, these are some of the considerations companies and investors need to look whist considering the best way to marry taxation and investment decisions regarding ESIC.
We really appreciate the work the ATO are doing in this area, so much so we are actively supporting a high % of the total ATO ruling output, which is great for us, as it means we have access the the biggest private tax law resource, outside of the ATO in the country.
So if you are considering applying for a ruling or using one, please feel free to drop us a line, we'd love to reconsider old ground, or crack open a new file.
Keep iterating,
Tom
NB: ATO INVESTOR MEMORANDUM ATTACHED
Some argue that an ATO PR is a carrying the 'gold standard' as far as ESIC, however caution and skill is still required in obtaining one and or relying upon it.
Consider that ESIC status is 2 ways, firstly the company must be eligible, but also the investor. Failing by virtue of a close association with the startup, and or by acquisition or two many shares are just a couple of the trips that have caught correspondents to our service.
Thereafter you need to look at the ATO ruling in depth;
- A PR is only as good as the information provided (i.e. if the facts are wrong, the ruling will be invalid)
- the time the ruling applies (some only apply for a prior issue date of shares), others are limited to the 2016 tax year
- the time you will use the ruling (the clock is ticking through to the 30 June).
- subsequent events, e.g. a ruling based on the 2016-17 R&D spend
- a ruling or indeed any ESIC Status is no guarantee of an investment
- alternate qualification (many principals based rulings will be naturally superseded by points based qualification over time).
- disclosure by the company (all private rulings become 'depersonalised' public documents)
- subsequent audit of the investor (who is ultimately responsible for validating the ESIC claim)
Don't take it the wrong way, these are some of the considerations companies and investors need to look whist considering the best way to marry taxation and investment decisions regarding ESIC.
We really appreciate the work the ATO are doing in this area, so much so we are actively supporting a high % of the total ATO ruling output, which is great for us, as it means we have access the the biggest private tax law resource, outside of the ATO in the country.
So if you are considering applying for a ruling or using one, please feel free to drop us a line, we'd love to reconsider old ground, or crack open a new file.
Keep iterating,
Tom
NB: ATO INVESTOR MEMORANDUM ATTACHED
