The Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, today announced a package of measures that will complete the taxation arrangements for the new venture capital regime that was introduced in 2002.
The venture capital regime was introduced to encourage new foreign investment into the Australian venture capital market and to further develop the venture capital industry.
Under the new regime, certain tax exempt and other eligible foreign investors are exempt from income tax on profits or gains on certain eligible equity investments made by a venture capital limited partnership (VCLP) or similar eligible entity.
“This package of measures will complete the Government’s commitment to establish an internationally competitive framework for venture capital investments and to bring Australia into line with what is currently recognised as ‘best practice’ within the international venture capital market,” Senator Coonan said.
“These changes expand the range of venture capital investments that will be eligible for the tax concession and ensure that the regime operates as intended by removing minor impediments.”
The tax concession will now be available for eligible investments a VCLP or other eligible entity makes into a holding company of a corporate group. This change recognises that holding companies are a popular investment structure used in the venture capital industry.
Another change will allow companies that spin off from a corporate group or institution to be treated independently. The acquisition of a company with assets valued at less than $250 million from a corporate group with assets valued at more than $250 million can be an eligible investment if the company will not be connected to the group after the investment has been made. Integrity rules will deny eligibility to the concession where large corporate groups are being acquired in stages.
This change will ensure a genuine start up business is not prevented from being treated as an individual entity with its own assets for venture capital purposes where it has been spun off by its parent entity.
A number of other changes will ensure the venture capital regime operates as
intended by removing minor impediments.
These changes will take effect from 1 July 2002, the date the venture capital
regime commenced.
Additional detail concerning these proposed changes can be found on the Treasury
website.