Investors now have another reason to back startups with new tax deductions and capital gains tax exemptions through Australia’s leading accelerator program now that BlueChilli has been approved as Australia’s first Early Stage Investment Company (ESIC) eligible accelerator program by the Australian Tax Office (ATO) through a private ruling.
Under the ATO rules, sophisticated investors into an ESIC startup receive an immediate tax deduction equal to 20% of their investment. They can also disregard any capital gains tax, as long as they sell their shares within ten years.
To be eligible, startups must either apply for ESIC using a principles test or points based test. Under the points based test, startups that have gone through an “eligible accelerator programme” (such as BlueChilli) automatically receive 50%. The remaining 50% can be earned if they raise more than $50,000.
“The ATO private ruling will make it much easier for our startups to raise capital”, BlueChilli Head of Venture, Luther Poier says. “This is a boon for startups that go through our accelerator programs, as they are more likely to have raised far more than $50,000 in their first round.”
According to the latest industry Crossroads Report, angel investment fell by 46% in FY16-17. The federal government’s initiative aims to address this by encouraging more investment in startups, an initiative welcomed by the Startup Ecosystem.
The latest ATO private ruling is a huge win for sophisticated investors looking to amplify their returns.
The accelerator already makes use of several government initiatives including its capital gains tax exempt ‘Early Stage Venture Capital Limited Partnership fund’ (ESVCLP) structure through the BlueChilli Venture Fund, managed by Artesian. The fund has already made more than 50 investments and has seen more than 400% growth within the portfolio.
BlueChilli is an early stage accelerator, investing at pre-seed at “ideas stage” startups to help entrepreneurs build their first product, get their first customer, raise their first investment and hire their first team members. BlueChilli has invested in over 100 startups of which 60% have successfully raised capital and has helped it’s startups raise over $64M.
The program was recently named Accelerator of the Year at the Australian Startcon awards in Sydney.
BlueChilli recommends any investor seek their own independent advice before making any investments in startups.