The Venture Capital Program

Here we discuss the Venture Capital program, which has not historically been considered a direct investor incentive program although one program offers the greatest incentives complete tax exemption on investment returns, but actually fall under the umberella of “Tax benefits and support to stimulate the early stage venture capital sector” not the Australian SME sector of Australian SME investors.

Lellco takes a different view to this, whereby the investment offeror needs greater access to the full range of tax incentive programs, which is why we offer our Tax Incentivised Investment services.

R&D Tax Incentive Scheme;
Personal Direct Investment Incentives
The Venture Capital Program
Matrix of Programs
Optimised Incentive: Self-Managed VC Funds

The Venture Capital Program

The Venture Capital program was created over ten years ago, designed largely to imitate the U.S. model and therefore to be more internationally palletable to very large and institutional investors.  Its primary function is to stimulate the venture capital industry, an objective sought to be achieved in part through investor tax incentives.  But, investor tax incentives have never been the primary objectives.

There are two levels of fund under the VC program; Venture Capital Limited Partnerships (VCLPs) and Early Stage Venture Capital Limited Partnerships (ESVCLPs).

VCLPs only have tax incentives for the manager and for entities that were already tax exempt (yes, that is correct).

ESVCLPs do offer real tax incentives to investors by way of complete tax exemption (i.e. both capital and income).  There are some similarities with AITI in that the criteria of qualifying investments is prescriptive and while not as limiting as that of AITI most funds have self-restricted to very narrow qualifying areas.  Also like AITIs the self-restricted fund designes mean most investments are highly speculative, failure rates are very high and due to the inability to mitigate against investee failure exemption on capital losses is very damaging.

Arguably, it seems the greatest limitation is the necessity for complete reliance on the ‘fund manager’, as evidenced by the low level of investment via the 100 currently registered ESVCLPs compared to annual direct SME investment.

For venture managers there has been no scope to pre-qualify their investment for tax exempt status, or even to know which VC fund is approachable.  Lellco now provides these services.