All about innovation

An optimist in principal?

2017-11-21 13:03:18

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You may have noticed quite a bit of lag on the listings page, with plenty of pending and even unlisted applicants. Are we simply being too conservative? Or is the process really that hard?

We wouldn't agree with either statement, and would instead point to the fact that most of our listings are early stage. It starts out as an enquiry and hopefully leads an accelerated opportunity, but I digress.

The primary drag on an automated solution is risk. Risk of error to be precise. Our view is that self assessment is a painful process that can only be automated for the points assessment, well at least for now. That's a 'matter of opinion', though it's much less debatable than the principals test.

Make no mistake, we aren't dissing the option, though we must warn those who are under-prepared. We've already seen some examples, that would come unwound in an ATO audit.
 

Don't believe it? Consider the attached second page of the draft ATO flowchart...

So where too from here? 

Records records and more records, and I'm not talking about music. If you are seriously considering claiming on principal you are really in the record creation phase, innovation assessment, business plans, commercialisation strategy, leverage assessment, competition analysis, demonstrated evidence etc.

Need another option, other than the points assessment? We would recommend putting similar work into the Commercialisation Australia grant, R&D or an Accelerator application. Better yet combine all 3 and set in motion you strategy (noting that 'all leave has been cancelled'),

No one said it was going to be easy!

Cheers, Tom

 

 

Published By: Tom

Sales ends 30 June

2017-11-21 13:02:45

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Hi all, 

Its a great day, a day to celebrate, the day you sign your first sale! 

It could also be the day you wind the clock forward, and end your chances of securing investment on the back of your ESIC status.

What? Why? No Way?

Well, we hate to point it out, but yes, that's the way they slice it. 

Companies with sale of over $200k last year are not considered early stage, no ifs or buts (except the ACA grant).

So a $221k (inc gst) in sale on the 9/9/16 will end your eligibility (assuming you've got it) by the 30 June 2017 (not 9/9/17).

Save the second bottle of bubbly and secure your investors before the deadline,

Cheers,

 

Published By: Tom

Is timing everything?

2017-11-21 13:02:42

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Business people will often recount when timing was everything, explaining in detail the conditions that were just right or wrong enough to make a significant difference. 

With ESIC's for example the rule holds true to the extent of the early stage test, a company incorporation date cannot be taken back, however I'd like to disagree with the principal overall.

As an early stage business looking at the new tax rules it is easy to assume to wait until you accrue some points towards the objective innovation test. Fair enough, lets wait until our patent application is approved or how about we apply for a commercialisation Australia grant and look into it then. You are just too busy!

We'll so far those strategies have proven wrong about 8 out of 10 times.

We are seeing most grant recipients and patent holders excluded. Not because they don't have the 100 points, quite the contrary, its the income / expense / age tests that these companies are failing.

Like any serious undertaking, you need to plan your funding round and ESIC draw card. Take a closer look at the R&D and accelerator points and or consider a private ruling. Put the wheels in motion at least 3 months ahead of closing your investors and perhaps you can hold onto more of the business whist building the runway you need to succeed.

Don't be surprised if its too late otherwise,

 

Published By: Tom

Excluded Trades

2017-11-21 13:02:40

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Even when we were kids, it was always fascinating to plot who's in and who's out and the new ESIC rules are no exclusion.

Right now we advisors are waiting on baited breath for the ATO to advise on what trades are excluded by regulation from the definition of an ESIC. Yes, that's right, you could pass all the tests and still find that the ATO have deemed your calling as ineligible.

We've no authority on this at the time of writing however we're going to use that void in advisory to take a guess on who misses out;
- Property Developers
- Stock, shares, land and financial product dealers
- Renting / lease businesses
- Legal and accounting firms
- Ship building
- Hotels, Nursing homes or similar
- Electricity generators
- Royalty/licence fee earners 
- Service providers for the above
- More?

We are not sure if the rules will become retrospective or if early adaptors will be considered acceptable, however I'd safely assume an exclusion is an exclusion (even if it's advised after the money changes hands).

Could some other area's come up? Certainly, so we'd add mining, steel, forestry, faming and others depending on the politics behind the exclusion process.

Guessing is free, but getting it wrong could be very expensive so we can only advise that you apply to the ATO for a private ruling if your concerned about the outcome of your investment/share allotment.

Regards,

Tom

NB: See our advisor listing for help with an ATO ruling

 

Published By: Tom

50,001 unhappy returns

2017-11-21 13:02:37

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If you are like most of us, a retail investor you'll be thinking that $50,000 is a lot of money and looking at the annual cap as a non-issue.

Maybe a rights issue, scond or 3rd investment comes along and you are not so sure.

Often angel rounds have a minimum buyin at $50k so your capped out in a single transaction. So what, your thinking clever me I've claimed $10k back and a have a tidy little CGT. exemption up my sleeve.

Don't be so sure, particularly if your prone to take an option or 2 on the side.

The legislation is quite ruthless when it comes to retail investors, 50k is it, one cent more and your entitlements are extinguished, including the CGT exemption.

The 50k includes all ESIC's so you will have to consider all other investments made that year. Perhaps your $1 founder share in your own startup will push you over the threshold? perhaps another investment that you assess as non eligible is assessed by others as an ESIC and the ATO agree.

You can be sure that 20:20 hindsight will catch wary and unwary advisors off guard, and perhaps our directory or updates could help you avoid a nasty audit surprise!

May 50,000 blessings be upon you,

 

Published By: Tom