Venture Capital Limited Partnerships (VCLP)

Tell me about the assistance

Fund managers can raise a new venture capital fund as a Venture Capital Limited Partnership (VCLP). VCLPs can operate in Australia or a foreign country and receive flow-through taxation treatment. Partnerships may also request conditional registration.

  • Status: Open (accepting applications)
  • Applications close: Ongoing
  • Delivered by: AusIndustry

Overview

The VCLP programme aims to stimulate Australia's venture capital sector by attracting foreign investors. It is also open to domestic investors.

Innovation Australia’s Innovation Investment Committee (the Committee) registers VCLPs under the Venture Capital Act 2002.

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 per cent of employees and at least 50 per cent of assets are located in Australia
  • its predominant activity is not in property or land development, finance, insurance, construction or infrastructure or making investments.

The taxation benefits for VCLPs are:

  • flow-through taxation treatment for registered venture capital partnerships
  • exemption to investors (limited partners) from capital gains tax on their share of profits made by the partnership
  • the fund manager can claim their carried interest in the partnership on the capital account, rather than revenue.

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.

The VCLP programme is jointly managed by the Committee with the support of AusIndustry and the Australian Taxation Office.

If you are a business seeking venture capital see the list of VCLPs.

If you are an investor seeking access to a portfolio, see the list of early stage companies.

What support or funding is available?

Fund managers planning to raise a VCLP of at least $10 million can apply to the Committee 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.

Who can apply?

You can apply for a VCLP if you:

  • are 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 and
  • have at least $10 million committed capital.

What are the eligibility criteria?

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:
    • remains 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)
    • does not hold any investments.

More information about the eligibility criteria is available in 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 do I apply?

Potential venture capital fund managers are required to submit a complete application to Innovation Australia for registration that includes the following:

  • a VCLP application form. For a copy of this form please email venturecapital@industry.gov.au
  • a Limited Partnership Deed with a certificate of registration as an Incorporated Limited Partnership from the relevant State Government authority
  • individual investor Subscription Deeds (if seeking unconditional registration)
  • the partnership’s Information Memorandum and any public offer documents.

 For a hard copy of the form, email AusIndustry at venturecapital@industry.gov.au or call us on 13 28 46.

How will I know if I am successful?

The Committee will grant registration if the partnership meets the eligibility criteria. The Committee has 60 days to decide which can be extended by a further 60 days.

The Committee 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.

Key documents

You might also be interested in