Venture Capital Limited Partnerships (VCLP)
At a glance
Provides venture capital limited partnerships (VCLPs) with a flow-through tax incentive (exemption from capital gains tax for gains made on eligible investments) for foreign investors to stimulate Australia’s venture capital sector by attracting foreign investors.
Who can apply:
At a minimum, you must:
- be either a limited partnership or an incorporated limited partnership
- be established in Australia or in a country that has a double tax agreement with Australia
- have at least $10 million committed capital.
Other eligibility requirements may apply.
The VCLP program aims to stimulate Australia's venture capital sector by attracting foreign investors. It is also open to domestic investors.
The program is jointly managed by Innovation and Science Australia (ISA) with the support of AusIndustry, within the Department of Industry, Innovation and Science, and the Australian Tax Office.
ISA is the body established under the Industry Research and Development Act 1986 responsible for administering the VCLP program. In July 2017, changes were made to the delegation of powers for the Venture Capital Act 2002 (VC Act). ISA has delegated its decision making powers to the Innovation Investment Committee and to senior executive staff of AusIndustry - Innovation Programs (authorised delegates).
An authorised delegate registers VCLPs under the VC Act. They have 60 days from receiving a complete application to make a registration decision.
Generally, a VCLP can invest in Australian businesses with total assets of not more than $250 million by acquiring shares, options or units. The businesses they are investing in must have either a company or unit trust business structure. A VCLP may also invest in unlisted companies or unit trusts that will delist within 12 months.
The VCLP must hold the investment for a minimum of 12 months.
The investment must also be at-risk and the investee company must meet the following requirements:
- The total value of its assets is no more than $250 million.
- At least 50% of employees and at least 50% of assets are located in Australia.
- Its predominant activity is not in property or land development, finance, insurance, construction or infrastructure or making investments.
Fund managers planning to raise a VCLP of at least $10 million can apply to register the partnership as a VCLP.
A VCLP is entitled to:
- flow-through tax treatment (it is not a taxing point), and
- its eligible foreign investors do not pay capital gains tax on their share of returns the VCLP makes from eligible venture capital investments.
Returns to domestic investors are taxed and a deduction for any losses may be allowable.
The extent of the tax benefit depends on a number of factors. Fund managers seeking to register a partnership should seek professional tax advice.
VCLP’s must establish new partnerships. It is not possible to restructure an existing partnership. If you are a business seeking venture capital see the List of VCLPs.
If you are an investor seeking access to a portfolio of early stage companies, see the List of ESVCLPs.
You can apply for a VCLP if you:
- are either a limited partnership or an incorporated limited partnership
- are established in Australia or a foreign country that has a double tax agreement with Australia
- have a general partner who is a resident of either Australia, or a foreign country that has a double tax agreement with Australia
- have at least $10 million committed capital.
To register a VCLP, a partnership must:
- be structured as a limited partnership
- be established in Australia or a country with which Australia has a double tax agreement
- have a partnership agreement that:
- requires the partnership to remain in existence for not less than five years and not more than 15 years
- requires partners to contribute capital when required
- prohibits the addition of new partners except as provided for in the agreement
- prohibits increases in committed capital except as provided for in the agreement
- confers on a general partner the right to require partners to contribute their committed capital to the partnership
- includes a plan which outlines its intended investment activities
- has a general partner that is a resident of either Australia, or a foreign country that has a double tax agreement with Australia
- has at least $10 million committed capital (a partnership that does not satisfy this requirement may be eligible for conditional registration).
For more information on the eligibility criteria please refer to the Customer Information Guide.
All information should be read in conjunction with the relevant legislation: Venture Capital Act 2002, Income Tax Assessment Act 1997 and Income Tax Assessment Act 1936 which can be found at ComLaw.
How to apply
Applicants must apply to Innovation and Science Australia for registration under the Venture Capital Act 2002. Innovation and Science Australia has delegated its decision-making powers for VCLPs to authorised delegates.
If you would like to apply for registration as a VCLP, complete and submit the online application form, including the following documents:
- a certificate of registration as a limited partnership or incorporated limited partnership from the relevant state or territory government authority.
- a certificate of registration if the general partner is a venture capital management partnership.
- an investment plan included in the signed partnership deed.
- a signed limited partnership deed (including the investment plan). If applying for conditional registration, you will need to include a signed basic partnership deed with your partnership deed, if the latter is not signed. The partnership deed must include the following clauses (use the exact 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, and
- the partnership must remain in existence for a period not less than five 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).
- 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.
The delegate may request further information, documents or evidence relating to the application for registration.
The delegate of Innovation and Science Australia has 60 days after receiving a complete application to decide an application for registration. The 60 days starts the day after the complete application is received. An incomplete application delays the start of the 60 day period. If the last day to decide an application - the 60th day - falls on a Saturday, Sunday or public holiday, the decision can be made on the next business day.
If the delegate of Innovation and Science Australia determine the application is not complete, the application will not be considered for registration. The 60 day legislative timeframe for consideration will not commence until the correct information is received.
If your application is successful
An authorised delegate will grant registration if the partnership meets the eligibility criteria. The authorised delegate has 60 days to decide a registration application, which can be extended by a further 60 days.
The authorised delegate will advise the fund manager if a partnership has been granted or refused registration.
For VCLPs, AusIndustry provides support over the life of the partnership.
- Customer information guide
- Overview of VCLP
- Comparison of VCLP and ESVCLP
- Expectation and compliance statement
- Forms approved by Innovation and Science Australia
- Information Paper No.1 - A partnership's committed capital
- ISA Information Paper - Extension of application timeframe
- List of Venture Capital Limited Partnerships