Start-ups to benefit as ATO grants special eligibility to Hall & Wilcox incubator participants

Start-ups that participate in Frank Lab are gaining an edge after Hall & Wilcox’s start-up accelerator has been granted a special eligibility by the Australian Taxation Office (ATO).

In a private ruling, Frank Lab has been granted early-stage innovation company (ESIC) eligibility, the firm announced. This means that participants of the incubator will receive 50 points of the 100 points needed to qualify as an ESIC.

The ESIC status grants start-ups significant tax incentives, including immediate tax offset or a rebate of 20% of investments, capped at $200,000 per financial year. ESIC start-ups also have the option access a modified capital gains tax treatment, Hall & Wilcox said.

All of these will make start-ups qualified as ESICs more attractive to investors.

“Qualifying ESIC participants in the Frank Lab accelerator will now be able to attract greater investment through investor-friendly tax incentives,” said Jasmine Koh and James Bull, heads of the Frank practice.

To qualify as an ESIC, a start-up must also meet the ATO’s four early-stage test requirements, which are: incorporation or registration through the Australian Business Register; an assessable income of $200,000 or less in the previous in income year; a total expenses of $1m or less in the previous in income year; and not being listed on any stock exchange.

“While our wish list would include an increase in the rebate and the cap, startups that qualify as an ESIC still offer investors sizeable tax advantages, which can make them very appealing,” Koh said.

Frank Lab is accepting applications until 24 January for its first six-month program for 2020, which starts on 1 March.