Venture capital tax breaks under consideration

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“Australia’s tax parameters are just not as efficient as they should be.”

Australian Investment Council chief executive Yasser El-Ansary praised the government’s review. Glen mccurtayne

Venture capital finances a business in the start-up and growth phase.

The funds invested are used to develop an idea at a stage where there is business potential before which it may be difficult to attract normal business investment, according to the Australian Taxation Office.

“Venture capitalists 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 efficient way. profitable and to access specialized venture capital management, ”says the ATO website.

The Venture Capital Limited Partnerships program provides flow-through tax treatment so that the company’s tax liability is transferred to the underlying investors.

Venture capital sponsors are exempt from tax on income on capital and profits on disposal of assets.

Fund managers are taxed preferentially on their “participation” in the partnership as a discounted capital gain.

Investors eligible for tax breaks are typically mid-sized fund managers and private equity funds.

“It’s about encouraging risk taking and capital investment in these highly innovative and risky companies early in their life cycle,” said Mr. El-Ansary.

Members of the Australian Investment Council include private equity, venture capital and private credit funds, as well as institutional investors such as pension funds and sovereign wealth funds.

The Treasury will consult with the industry in 2021, the government said.

The government’s broader digital economy strategy will allow companies to write off software, patents, designs, copyrights and other so-called intangible assets more quickly, as part of a $ 1.2 billion package. dollars.

The strategy, unveiled by Prime Minister Scott Morrison on Thursday, contained tax incentives to promote the development of a stronger gaming industry, funding to help small and medium-sized businesses digitize their processes and $ 500 million to give to consumers better access to their health and government data. .


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