014-098 - Early Stage Venture Capital Limited Partnerships

The programme aims to stimulate Australia's venture capital sector by helping fund managers attract pooled capital.  Fund managers who plan to raise an Early Stage Venture Capital Limited Partnership (ESVCLP) of between $10 million and $200 million can apply to Innovation Australia’s Innovation Investment Committee (the Committee) to register the partnership as an ESVCLP.

An ESVCLP is a flow-through entity (it is not a taxing point).  Its investors pay no tax on their share of returns (capital or income) when an ESVCLP disposes of an eligible investment.  However, an investor's share of a loss arising from the disposal of an eligible investment is not deductible.

Broadly an eligible investment is the acquisition of new shares or units in an eligible Australian business with total assets of not more than $50 million.  An ESVCLP is no longer required to divest an eligible venture capital investment when it exceeds $250 million (although tax concessions are restricted from this threshold).

The programme is enabled by the:
•    Venture Capital Act 2002 (VCA); and
•    Income Tax Assessment Act 1936 and 1997 (ITAA36 or ITAA97).

This paper gives an overview of Early Stage Venture Capital Limited Partnerships and has been written under the following headings:

  • Overview
  • Eligibility Criteria
  • Registration
    -  Applying for Registration
    -  Granting Registration
    -  Conditional Registration
    -  Full Registration
    -  Registration In Force
    -  Maintaining Registration
    -  Reporting Requirements
    -  Revoking Registration
  • Approved Investment Plan
    -  Variation of an Approved Investment Plan
    -  Operate in Accordance with an Approved Investment Plan
    -  Reporting on Implementatoin
  • Capital Raising and Partnership Size
    -  Minimum and Maximum Size
    -  Limit on Amount an Investor can Contribute
    -  Committed Capital
  • Regulation of ESVCLP Activities and Investments
    -  ESVCLP Activities
    -  Eligible Investment
    -  Investments Permitted
    -  Permitted Loans
  • Managing an ESVCLP
    -  General Partner
    -  Venture Capital Management Partnerships
    -  Reporting to the Committee
    -  Statement of Expectation
  • Taxation
    -  Description
    -  Capital Gains and Losses
    -  Income Derived from Eligible Venture Capital Investment
    -  Gain or Profit from Disposal of Eligible Investments
    -  Carried Interest
  • Monitoring and Sanctions
    -  Powers to Direct
    -  Powers to Monitor
    -  Annual Report
  • Professional Advice

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