Tax review backs VC investor breaks

Joseph Brookes
Senior Reporter

A government review has backed Australia’s venture capital tax breaks, finding investment vehicles and concessional treatment have helped $20 billion in capital commitments in the last two decades.

But the report, which was completed nearly a year ago, was never released by the former federal government, and further promised investment vehicles were never introduced.

According to the report, $20 billion of capital has been committed through three government programs that stretch back as far as 2002. The investment has helped an estimated 1775 unique businesses with $11 billion in direct investment.

While the review found the growth in venture capital was driven by global trends and macroeconomic factors, the government programs are credited with having “likely played a supporting role” and have the backing of many stakeholders.

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Changes made in the early 2000s have support

The Venture Capital Tax Concessions Review was conducted last year with industry consultations and finalised by November. It is understood former Treasurer Josh Frydenberg was provided with a draft copy before then but never moved to release the report.

The federal election then delayed the tabling of the review which eventually occurred last Thursday, nearly a year after it was completed but within weeks of new assistant treasurer Stephen Jones receiving a copy.

The generally positive report has been welcomed by the private investment industry group, the Australian Investment Council.

“As a net importer of capital, Australia relies on a dependable and steady flow of foreign capital to drive economic growth, job creation and innovation,” AIC head of policy and research Dragan Misic told

“It is pleasing to see the report recognises the positive contribution that the tax concessions and the specific investment vehicles for venture capital –have made in attracting domestic and foreign capital into early stage and growing businesses.”

The review evaluates the effectiveness of Venture Capital Limited Partnership (VCLP), Early Stage Venture Capital Limited Partnership (ESVCLP), and Australian Venture Capital Fund of Funds (AFOF) but recommendations for change are beyond its scope.

Led by Treasury and Industry Innovation and Science Australia, the review found the concessions and investment vehicles have been well received, supported the growth of the venture capital sector, and have the support of stakeholders.

The VCLP and AFOF programs were introduced in 2002 following the dotcom crash to establish a best practice investment vehicle and tax exemptions, respectively. The ESVCLP program was added in 2007 to provide more targeted concessions with an early stage limited partnership model.

“Importantly, the report recognises the VCLP program has facilitated significant foreign investment into the Australian venture capital sector, by offering the prospect of attractive returns and an internationally recognised, fiscally transparent Limited Partnership investment vehicle,” Mr Misic said.

Further investment vehicles were promised in the 2016-17 budget by the former Coalition government, including a Limited Partnership Collective Investment vehicle, but were never introduced, despite investors’ criticism.

In last week’s budget, the new Labor government officially scrapped the plan for a Limited Partnership Collective Investment vehicle as part of a budget that found $22 billion in savings.

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