The US playbook does not transfer cleanly. Four places where the Australian position is different.
Most of what founders read about SAFEs and convertible notes is written for a US company raising from US investors under Regulation D. The instruments travel; the law around them does not. An Australian company using a SAFE off a US template is making an offer of securities under the Corporations Act, with all that implies, and may be quietly costing its investors a tax concession worth 20% of their cheque.
General information, not advice. CatenaHQ is software. These guides are not legal, financial, tax or investment advice, and none of them takes account of your circumstances. Current as at October 2026. The classification questions below turn on the terms of your specific instrument; get them reviewed.
A loan that converts to equity on a trigger, usually the next qualifying round. It typically carries interest, a maturity date and a repayment obligation if it never converts. The investor is a creditor until it does.
A contractual right to receive shares on a future event. No interest, no maturity date, no repayment obligation. If the trigger never happens, there is generally nothing to repay — which is the point, and also the risk the investor accepts.
Both usually carry a discount, a valuation cap, or both. Neither sets a price today, which is the shared appeal: you defer the valuation argument to a round with a lead in it.
A SAFE or note conferring a right to future shares is likely a security under the Corporations Act. Issuing one is an offer of securities, which triggers the Chapter 6D disclosure requirements — a prospectus — unless an exception applies.
In practice you rely on the same section 708 exceptions you would for a priced round: the small-scale 20-person and $2 million ceiling, the sophisticated investor certificate, or the professional investor limb. The small-scale ceiling aggregates across all your securities offers in the 12-month period, not just the notes — so a note round and a priced round in the same year count together. The s708 guide covers each exception.
The verification you do for a note round is the verification you do for any round. Treating a SAFE as a simple contract between friends does not remove the obligation.
For tax purposes, instruments are classified as debt or equity under Division 974 of the Income Tax Assessment Act 1997, and the classification follows the substance of the terms rather than the label on the document. A standard SAFE — no interest, no maturity, no repayment — will generally be an equity interest.
Add a maturity date, a repayment obligation or an interest coupon and the instrument moves toward debt, which changes the treatment for both the company and the investor. This is the part that catches a founder who starts from a SAFE template and then negotiates in a few note-like protections at the investor's request. The document still says SAFE. The tax treatment may not agree.
An investor only gets the ESIC incentive on newly issued shares. Shares issued on conversion of a convertible note can qualify — but the relevant date is the conversion date, and the company has to satisfy the early stage tests immediately after those shares are issued.
The early stage tests are expenses under $1 million, assessable income under $200,000, incorporated within the last three years, and unlisted. A note raised when the company passes all four comfortably may convert eighteen months later when it passes none of them. The investor expecting 20% back gets nothing, and the company that implied otherwise has a conversation to have.
If your investors are angels for whom ESIC is part of the thesis, that is a real argument for pricing the round now rather than deferring it. The ESIC guide sets out the tests and the other exclusions, including the one that catches companies with more than fifty shareholders.
A note or SAFE is not on the share register, because no shares have been issued. It is still dilution, and it is dilution with terms attached — a discount, a cap, sometimes both, sometimes most-favoured-nation clauses that reach back into earlier instruments.
A cap table that shows only issued shares is wrong in the direction that flatters everybody, which is the direction that causes arguments at the priced round. Every instrument outstanding needs to be modelled on conversion, at the cap and at the discount, against the round price actually on the table.
References to Delaware, Regulation D or accredited investors are a sign nobody checked it against the Corporations Act.
Three notes at different caps and discounts, converting at once. The founder discovers the real dilution in the term sheet negotiation.
The verification obligation applies to the note offer, not just the eventual shares. The evidence has to exist at the time of the offer.
Negotiated-in maturity and interest change the Division 974 analysis regardless of the document's title.
Qualification is tested at conversion. Promising it at investment is promising something you do not control.
A note that matures unconverted is a debt that is due. Companies have been surprised by their own paperwork.
CatenaHQ carries convertible instruments alongside issued shares with their caps, discounts and maturity dates, so the fully diluted position includes what has not converted yet, and the conversion can be modelled against a real round price before you agree to one. When it converts, the resulting shares land on the register with their issue date — which is the date the ESIC question turns on.
Tracking notes and SAFEs alongside issued shares is what the cap table and share register module is for.
All of the CatenaHQ guides are written the same way: from the Act and the regulations, with the section numbers shown.
The four early stage tests your company must still pass on the day the note converts.
The exceptions your note round relies on, and the ceiling that aggregates across every offer in the year.