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What If You Don’t Pass The Sophisticated Investors Test in Australia

What If You Don’t Pass The Sophisticated Investors Test in Australia

What If You Don’t Pass The Sophisticated Investors Test?

In essence the key concept here, the take-home message is, if you’re looking to raise capital, you need to be considering your ESIC® status. What does that look like?

As we mention there’s three concepts. The key concept in terms of accelerated capital raising, the way to quickly raise capital, is to be ESIC® ready. What we’ve done at ESIC® Hub is created three concepts:

You’ll be ESIC® ready that means that you’re ready to go and raise capital and engage in informed discussions with informed serious investors. We have investors connected at the hub that are looking for very good investment opportunities. The starting point is that they need companies that are ESIC® compliant or ESIC® ready. So, that’s the starting point for companies like yours looking to raise capital The second step is that you may not be ESIC® ready but you might be an ESIC® in progress and that basically means that you’re a company that’s not quite ready to raise ESIC® capital at the moment but you are in the zone and on a pathway to raising capital under the new ESIC® regime. The third one is that you are not ESIC® which may mean that you’ve got terminal surgery which won’t enable you to ever be an ESIC® or you may have circumstances that may need reassessing or tweaking to get you into the ESIC® status so that you can take advantage of these new capital raising rules.

Non-sophisticated investors are also eligible. I might just recap what a sophisticated investor is. It’s a concept under the corporation’s law and it has particular significance. Basically, it means you are a high net worth individual and you have a significant amount of investment as validated by their independent accountant. A lot of people are sophisticated investors. If you’re not a sophisticated investor you can still apply for these tax benefits under the ESIC® program but that are reduced.

I mentioned before that a $1m investment by a sophisticated investor is very plausible. Non-sophisticated investors can only invest a total of $50k per annum in ESIC® to get these benefits. If they invest $1 more than $50k they lose all the tax benefits. The government’s architecture around this is very good and I’m a swinging voter, so I’m not being in any way political when I say this… I have seen a lot of investment programs; a lot of shonky salesmen go out and sell inappropriate financial products to vulnerable people. The program here is designed to try and protect those people by saying that if you invest more than $50k you won’t get any tax benefits and that will create all sorts of issues for the people selling those products.

Client approaches accountant for assistance in setting up new business and access to $seed capital.

Accountant refers client to ESIC Hub and Predictor on www.esichub.com to self-assess ESIC status

ESIC Hub conducts due diligence on client and reports back to accountant at meeting.

ESIC pathway to capital raising agreed and implementation begins. Sarah raises enough capital for the 2-year development runway. A happy client.

You and Us working together

ESIC® Hub is Australia’s first and only online platform dedicated to serving the needs of the early-stage community.  We offer you an effective pathway to efficiently allocate resources by utilising our deep technical knowledge and expertise to ensure client-centric outcomes are achieved.

We offer accounting professionals a choice of service models, all with a client-centric outcome to complement your trusted relationship and service offering to your clients.   We can arrange for an introduction or a presentation where we go through the tax laws surrounding ESICs to give you a better understanding of how these new laws can benefit your early-stage innovator clients.

At ESIC® Hub, we are excited to see how we can complement your advisory work to clients. We have an adviser sign-up questionnaire on our website that allows you to communicate with us and keep up-to-date with the ESIC® legislation and developments.

We look forward to working with you.

Contact Us

T: 61 2 8073 9191

W: www.esichub.com

E: [email protected]

O:  105 Queen St, WOOLLAHRA NSW 2025

     200 Queen St, MELBOURNE VIC 3000

P:   PO Box 905 WOOLLAHRA NSW 1350

Useful Links

The ESIC® predictor can be found on our website on both the ‘What are ESICsand ‘Early Stage Companypages.

You can also access our contribution here to The Tax Institute journal.

Learn more about who we are

For more ESIC® Hub assistance to the Accounting Profession - Contact Us