Tax benefits and support to stimulate Australia’s venture capital sector

On this page Overview How it works Tax benefits Eligibility Applying Other applications and registration obligations Contact Customer stories Partnerships, statistics and other help for investors and investees Guides, information papers and statement Sample forms Venture Capital Limited Partnerships (VCLP) The Venture Capital Limited Partnership program offers tax benefits to fund managers and eligible foreign investors to help stimulate venture capital investment. Benefits include an exemption for eligible foreign investors from capital gains tax on their share of a fund’s returns from eligible venture capital investments. Open Application detail: You can apply at any time using the online application form. What do you get? Partnership registration to get tax benefits for both fund managers and eligible foreign investors. Who is this for? Fund managers of a new partnership seeking to raise investment of over $10 million. About the program The Venture Capital Limited Partnership (VCLP) program aims to stimulate Australia’s venture capital sector. The program: helps fund managers attract pooled capital, so they can raise new venture capital funds of over $10 million to invest in innovative Australian businesses offers tax benefits to fund managers and eligible foreign investors connects investors with innovative Australian businesses helps Australian businesses grow by receiving financial support There is no ‘early stage’ test for investments as there is with Early Stage Venture Capital Limited Partnerships. Fund managers can apply to Innovation and Science Australia to register a partnership as a VCLP. The Department of Industry, Science and Resources and the Australian Taxation Office (ATO) jointly administer the program on behalf of the Australian Government. How it works A VCLP must be a new partnership rather than a restructured existing partnership. Applicants must apply to Innovation and Science Australia for registration under the Venture Capital Act 2002 (VCA). Innovation and Science Australia has delegated its decision-making powers for VCLPs to authorised delegates. A delegate will register a partnership as a VCLP if it meets certain eligibility criteria . If registered, a VCLP can then make venture capital investments in companies or unit trusts with total assets of not more than $250 million. The investments must also meet other criteria and be held for a minimum of 12 months. A VCLP must meet ongoing registration and reporting requirements under the VCA to maintain its registration. Once registered both eligible foreign investors and fund managers can claim tax benefits. VCLP tax benefits differ for eligible foreign investors and fund managers. The Foreign Investment Location Test applies when an Australian based VCLP invests in a company located outside of Australia. Open all Close all Tax benefits for investors Investors benefit from an VCLP’s flow-through tax status. The partnership itself is not taxed and the income and gains flow through to investors. This avoids double taxation. Eligible foreign investors are exempt from income tax on their share of profits (capital or revenue) made by the partnership. Returns to domestic investors are taxed but losses may be deductible. The tax benefits for investors depend on a number of factors. We have included more detailed information on these tax benefits in the VCLP Customer Information Guide . For tax concession enquiries, contact the ATO on: 13 28 66 in Australia 61 8 8208 1847 if you are overseas Investors should also seek their own professional taxation advice. Tax benefits for fund managers General partners (often also the fund managers) can claim their carried interest in the VCLP on the capital account, rather than on the revenue account. The extent of this benefit depends on a number of factors. We have included more detailed information on this tax benefit in the VCLP Customer Information Guide . Fund managers seeking to register a partnership should seek professional tax advice. For tax concession enquiries, contact the ATO on: 13 28 66 in Australia 61 8 8208 1847 if you are overseas Eligibility What are the eligibility criteria? You can apply to register if you are: a new venture capital fund a limited partnership or an incorporated limited partnership established in Australia or a country that has a double tax agreement with Australia You must have: a general partner (often also the fund manager) who is a resident of either Australia or a country that has a double tax agreement with Australia at least $10 million in committed capital (although a partnership that doesn’t satisfy this requirement may be eligible for conditional registration) In addition, you must have a qualifying partnership agreement that: ensures the partnership remains in existence for between 5 and 15 years requires partners to contribute capital when required prohibits adding new partners except as provided for in the agreement prohibits increasing committed capital except as provided for in the agreement confers on the general partner the right to require partners to contribute their committed capital to the partnership includes a plan outlining the partnership’s intended investment activities All information should be read in conjunction with the relevant legislation: Venture Capital Act 2002 Income Tax Assessment Act 1997 Income Tax Assessment Act 1936 Applying How do you apply? If you would like to apply for registration as an VCLP, complete and submit the online application form. You’ll need to include the following documents. A certificate of registration as a limited partnership or an incorporated limited partnership. This is issued by the relevant state or territory government authority. A certificate of registration if the general partner is a venture capital management partnership. An investment plan that is included in the signed partnership deed. A signed limited partnership deed which includes the investment plan and includes the clauses set out below. Details of all individual investors and their committed capital. The delegate may request documentary evidence of committed capital. The partnership’s information memorandum or any public offer documents. CVs of the key people active in your partnership. The partnership deed must include the following clauses (use the wording below): Require partners to contribute their committed capital as and when required under the agreement. Prohibit the addition of new partners to the partnership except as provided for in the agreement. Prohibit increases in the partnership’s committed capital except as provided for in the agreement. Confer on a general partner the right to require partners to contribute their committed capital to the partnership. The partnership must remain in existence for a period not less than 5 years and not more than 15 years from formation of the partnership (this is the date the partnership was registered as a limited partnership or incorporated limited partnership). The delegate may request further information, documents or evidence relating to the application for registration. Conditional registration The delegate may grant conditional registration to a partnership that does not meet all the requirements under the VCA, such as not having at least $10 million in committed capital. The partnership must satisfy the delegate that it is likely to meet all the registration requirements within 24 months of conditional registration. If applying for conditional registration you will need to include a signed basic deed with your long-form partnership deed, if the latter is not signed. Conditional registration lapses if the partnership is not registered within 24 months. A conditionally registered VCLP may in certain circumstances make investments. However, it must be fully registered before any tax exemption applies to those investments. You can’t advertise your VCLP as registered if it is conditionally registered. Any reference to ‘registered’ should clarify that the registration is conditional. Funds may wish to use the following statement: ‘The [insert partnership/fund name] is conditionally registered as a Venture Capital Limited Partnership and further conditions will need to be met before being registered as a Venture Capital Limited Partnership. Further information about conditional registration is available in the Customer Information Guide . Apply for VCLP registration now If you’re confident you’re eligible, you can apply using our online application form below. Make sure you: have all documents, including signatures as required read the Customer information guide Apply now Application decisions take around 60 days The delegate has 60 days after receiving a complete registration application to decide whether to grant or refuse the application. The delegate can also extend its decision timeframe for a further 60 days if it needs to. If the application is incomplete it will not be considered. The 60 day timeframe does not start until all information and documents are received. The department will advise the applicant of the delegate’s decision. Generally, the delegate will grant registration if your partnership meets the eligibility criteria. Other applications Other applications can be made to Innovation and Science Australia for decisions about ESVCLPs, VCLPs and AFOFs. Including loan repayment extensions or reviewing the application of the location test. Information for registered partnerships Learn how to manage your reporting, maintain your partnership and get support throughout your journey. Need help? Let us answer your question over the phone, email or live chat. Phone: 13 28 46 Open Hours: Monday to Friday, 8am to 8pm across Australia Website: Contact us Customer stories Many successful Australian businesses have accessed venture capital to help them develop their innovations and achieve commercial success. Venture capital funds have also been able to grow and prosper as a result of government venture capital initiatives. IP Group Australia and AMSL Aero – decarbonising aviation Spinifex Pharmaceuticals – most successful venture capital exit in Australian history More customer stories Partnerships, statistics and other help for investors and investees View a list of partnerships that have capital and are registered with Innovation and Science Australia. List of Venture Capital Limited Partnerships Find out more about seeking venture capital investment Pitch for venture capital Learn more about investing in Australia’s venture capital market Venture Capital Find out about our venture capital statistics Department of Industry, Innovation and Science See published statistics and research on the Australian venture capital industry The Australian Investment Council Guides, information papers and statement Customer information guide pdf · 0.35 MB docx · 0.18 MB Journey map pdf · 0.41 MB docx · 0.07 MB Fintech – Private finding application guidance pdf · 0.21 MB docx · 0.06 MB Information Paper – Approved forms pdf · 0.18 MB docx · 0.05 MB Information Paper – A partnership’s committed capital pdf · 0.39 MB docx · 0.06 MB Information Paper – Extension of application timeframe pdf · 0.63 MB docx · 0.07 MB Information Paper – Registered partnership’s failure to report pdf · 0.22 MB docx · 0.07 MB Expectation and compliance statement pdf · 0.20 MB docx · 0.08 MB Guide to calculating the exceptions from the Australian location test pdf · 0.27 MB docx · 0.22 MB Eligible Venture Capital Investment (EVCI) assessment form docx · 0.14 MB Sample forms Sample application form pdf · 0.31 MB docx · 0.29 MB Sample quarterly return form pdf · 0.11 MB docx · 0.11 MB Sample annual return form pdf · 0.19 MB docx · 0.13 MB