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How it will work in practice?
Jessica’s startup, PaySmart Pty Ltd, is moving to the next stage of development. Jessica has successfully developed a working prototype of her on-time bill payments software application with assistance from Alex, her early stage (angel) investor. She is now looking to commercialise her software and needs a further injection of capital. She is hoping to raise $5 million in equity funding.
Jessica receives funding from a range of venture capital funds, including a new ESVCLP (called A-OK Ventures). Moores Trust invests $500,000 into A-OK Ventures (alongside other investors) and A-OK Ventures invests this capital in the same income year. The 10% non-refundable tax offset available under the new arrangements will reduce the tax payable by the beneficiaries of Moores Trust by $50,000.
Three years later Moores Trust receives income from the disposal of investments and is exempt from capital gains tax and from tax on any share of income derived by the ESVCLP.