Venture capital and investors
Venture capital is a mechanism that finances a business at start-up and growth stages. The invested funds are used to develop an idea to a stage where there is commercial potential before which it can be difficult to attract normal commercial investment.
Venture capital investors typically invest in venture capital projects through intermediaries such as limited partnerships or funds of funds to diversify their portfolio of venture capital assets in the most cost efficient manner and to access specialist venture capital management.
Venture capital programs
The Venture capital limited partnership (VCLP) and Early stage venture capital limited partnership (ESVCLP) programs are designed to increase venture capital investment in Australia by providing beneficial tax treatment to eligible local and foreign investors. We jointly administer the programs with AusIndustry.
Benefits
VCLP tax incentives and concessions include:
- flow-through tax treatment for a VCLP
- an exemption for eligible foreign venture capital limited partners from income tax on capital and revenue profits from the disposal of eligible venture capital investments by the VCLP
- that fund managers are taxed on their carried interest in the partnership on capital account, rather than as income.
ESVCLP tax incentives and concessions include:
- flow-through tax treatment for ESVCLP
- an exemption for Australian and foreign venture capital partners from income tax on capital and revenue profits from the disposal of eligible venture capital investments made by the ESVCLP and any other income earned on these investments
- that fund managers are taxed on their carried interest in the partnership on capital account, rather than as income.
From 1 July 2016, if you invest or have already invested in an ESVCLP you may be eligible for further tax incentives, including a non-refundable carried forward tax offset of up to 10% of your contributions made to an ESVCLP that became unconditionally registered on or after 7 December 2015.
Lodging a tax return
If you need to lodge a tax return on behalf of a VCLP or ESVCLP, use the partnership tax return form.
The venture capital programs are designed to increase investment by giving tax concessions to eligible investors.