FAQs

Also called a rebate, a tax offset is like a credit note against your tax liability. So if you owe $15,000 in tax, but have a $10,000 offset, you will only pay $5,000 in tax. 

If you earn over $65,000 you are likely to have a tax liability of over $10,000. You can check your expected tax liability with the ATO’s calculator here. 

If your tax bill is lower, say $5,000, your $10,000 offset reduces it to zero. You can roll the remaining offset over to the following financial year. 

The offset is administered by the Australian Taxation Office. You claim the offset on your tax return.

Yes, it’s legal. 

The aim and outcome of our structure is to get new investors to put money into the hands of start-ups, so we can stimulate innovation. This is completely in line with the spirit, intent and letter of the Australian Taxation Office’s ESIC incentive. 

You are in safe hands. Our Co-Founder Peter has been working in tax and company compliance for over 30 years. He even wrote books on tax back in the day.

We do four things: 

1. Make sure the start-ups qualify as ESICs so that you are eligible for the offset. 
2. We manage the start-ups finances to safeguard the other 80% of your investment in the first year. 
3. Offer a funding partner if you require financing to be involved.
4. Streamline the start-up’s corporate governance and do the paperwork so they don’t waste time and money.

With respect to the offset, many people don’t know the ESIC offset exists. Or if they do, they don’t know how to qualify for it. So we make that part easy. 

And then when it comes to investing in start-ups, people can be hesitant because new businesses are uncharted territory. That’s why we manage and mitigate the risk in the first year so that investors have some protection even if the start up fails. 

And last, people might not have $50K spare to invest. That’s why we have a funding partner so that people can still participate and back innovation.

We understand why people think it’s too good to be true, but it really is true, legitimate and genuine.

You’re getting the benefit of expert financial structuring. This stuff may seem unfamiliar because it’s usually only used by the heavy hitters.

We share the risk. Why would we do this? Simply, we believe in giving start-ups a go. We’re passionate about it and we’re in a position to facilitate it.

A $50,000 investment attracts the maximum available offset for a retail investor, and the most use out of our risk management. So, this gets the maximum funding into the hands of start-ups and makes it all worthwhile. 

The offset is 20% of your investment, and the investment amount is capped at $50,000. So, a $10,000 offset is the maximum (without being a sophisticated investor). 

You are of course free to invest as much or as little as you want. It just affects the efficiency of the funding for the start-up.

Using debt to make investments is really not so unusual. You may have already done so with your mortgage or HELP debt. It can help you get ahead.

The loan is secured by the shares themselves. In the first year, the loan won’t come back to bite you because the start-up’s share value is steadied by our financial management. You have the option to sell your shares and repay your loan so you end up with no shares and no loan, which is exactly where you started. You’ve still retained some of the tax offset.

In later years, if you stay invested and keep your loan, you can still sell your shares at any time, but you are accepting the risk that the value of the shares may change.

It’s an investment loan agreement so it won’t affect your credit rating. You should declare this loan and your shares in other loan applications.

It’s a technical requirement so that we comply with ASIC. All our share offers are private offers so we need to know who we’re making offers to.

This is contrasted with public share offerings, which have a different cost and set of rules to comply with.

Less than you’d think. If you don’t have cash laying around, we can support you to fund your investment through our financing partner.

You can contribute as little as a $500 deposit upfront. So if you’re low on savings, you can still be a crucial part of supporting start ups and stimulating innovation.

We do all the running around to make sure the start-ups are fully compliant ESICs, so your investment is eligible for the offset.

If you’re an individual Australian taxpayer investing $50K or less, then you’re likely eligible. You can check your eligibility using the ATO’s decision tool here.

You don’t need to be an Australian resident to use the ESIC offset. For the offset to benefit you, you need to have a tax liability in Australia to offset.

At tax time, in your tax return. We will give you guidance on how to claim it if you prepare your tax return yourself, or instructions for your accountant. We also send you reminders around tax time to make sure you claim the offset.

No. You can choose to sell your shares at any time, as with any regular tradable shares.

The Year 1 checkpoint is only significant as it represents an appropriate amount of time to test an innovative idea, to best inform your investment decision. After the first year any gains on your shares are exempt from Capital Gains Tax under the ESIC rules.

The start-up is a private company, so it’s not publicly listed. That means there’s no marketplace to see the latest price. The start-up’s founders will give annual updates to shareholders on its finances and progress.

When you buy in, the shares are valued at $1 per share. The assets of the start-up stay fairly steady given we are managing its finances for the long term.

The value of the start-up’s IP for its innovation may or may not rise depending on progress, proof and perception. If the value rises, it may attract interest from external buyers. That’s when the value of your shares may go up.

The loan is paid annually, in arrears. So you won’t actually start repaying the loan until the end of Year 1. You could choose to sell your shares and clear the loan before you start repaying the loan. Or, if you want to keep your shares, then you start repaying the loan in annual repayments.

No, not in the first year. We do charge interest, but it is recouped if you sell your shares at the end of year 1.

How? 80% of your investment is held on deposit in the first year. We manage the start-up’s finances so that this portion of your investment sits there waiting for them to prove their idea. While it sits there it accrues interest.

If you choose to sell your shares at the end of year 1, there is enough equity in the startup that your shares will be valued sufficiently to cover the loan and interest. Also, interest you pay is tax deductible because it is an investment loan.

No. You’re more than welcome to fund your investment through your own cash or financing. We simply offer a financing option to make investing as accessible and low risk as possible.

You may still find the financing option useful even if you have the money, as you can wait to see if the idea has traction in the first year, and then if you choose to keep your shares, pay the bulk then.

If the start-up fails, we close it down efficiently. Enough equity remains to cover liabilities of shareholders in the first year. This is possible because we managed the start-up’s finances to a 5 year budget, provisioning the bulk of your investment.

That’s really the beauty of this structure and the whole point of why we do this! We know that new ideas and businesses are risky. But we know they’re important. We want to see ideas funded and given the opportunity to be tested and innovated. If it fails or succeeds, investors have supported the testing process. Your support is rewarded in a small way if it fails and in a big way if it is successful.

With our model, the risk to you as an investor is mitigated by the slow release of funds to the start-up over our 5 year budget.

In the first year, the risk is minimised as there is sufficient cash held on deposit by the start-up to distribute to you and cover your position if the start-up fails.

After the first year, each time we release funds to the start-up to spend on their growth and development, you accept more risk as an investor. The value of your shares will depend on the success of the start-up, and the market. It’s your choice whether you want to continue your support based on the risk and the start-up’s performance.

Yes. At any stage, you can choose to sell your shares and repay your loan.

Within the first year, we manage the finances to ensure there is enough equity in the startup that your shares will be valued sufficiently to cover your loan and interest. The shareholders agreement tells us to shut down the company and return the cash if no-one buys your shares.

If you retain your investment past the first year, you can still sell your shares at any time, but the value will be up to the market.

This loan is fully documented but the details are not publicly available. You should declare this loan and your shares in other loan applications. Lenders will normally ask you about your assets and liabilities. The startup shares are an asset and this loan is a liability. We can help unwind your position if they don’t give you credit for your shares.

AMG Finance (ACN: 167 025 407) is our sister company and finance partner. AMG Finance offers loans to facilitate your investment. You can read more about them on their website here.

The loan is an investment loan secured by your shares. The agreements that we have put in place make sure that if no one will pay enough for your shares to cover your loan, we simply close the company and give the remaining cash to the shareholders. This makes it easy for AMG Finance to take your shares and repay your loan with no loan repayments or defaults. In this case there would be no loss to you. Your deposit would be made good by the tax offset benefit you get at tax time.

In most cases, of the $10,000 offset: $2000 goes to you, $7500 goes to the start-up, and $500 goes to us to cover admin. So, you get a $2000 tax benefit for your effort.

Or, with the $500 deposit option, the tax benefit you retain is $500.

The reason to do this is to support a start-up you believe in, with peace of mind. You’ve benefited innovation and hopefully helped get an idea off the ground. That’s why we are excited to do it.

You have a low-risk investment in that first year, and there is still a chance your shares could increase in value. We’ve seen this happen. So there is also a possibility of a capital gain. And after the first year all ESIC capital gains are tax free for 10 years.

We take a one-off $500 fee, per investor, to cover our time administering the funding and loan.

When we bring start-ups on board we take a small equity share of 10%. Our small equity share is also diluted by the additional investors we bring on board (i.e. you). Our share compensates our work in setting up the start-up’s legal status, accounts and governance.

But mostly, we get the joy of seeing good ideas given a go; progressing incredible work, and just maybe be a part of the next big innovation.