Information for registered partnerships

Some partnerships are granted conditional registration if they don’t meet all requirements at the time of application, but their application suggests they will meet all requirements within 24 months. 

You will be informed by the department through a decision letter. The letter will detail the parts of the application requiring amendments before returning for full registration.

Making investments and claiming tax benefits while conditionally registered

A conditionally registered partnership can make eligible venture capital investments in line with the legislation. However, the partnership must become registered for the tax benefits to apply. The registration is then backdated to the date conditional registration  was granted.

For more tax information, see the ATO's Venture capital limited partnerships advice. 

You have up to 24 months to meet the registration requirements. You'll need to:

1. address the recommendations in your departmental decision letter
2. submit a new application. 

If your conditional registration lapses

Conditional registration lapses if your partnership does not meet the registration requirements after 24 months. 

We cannot extend this time, but your partnership can reapply for registration. 

General partners (fund managers) can claim their carried interest in the ESVCLP or VCLP on the capital account, rather than on the revenue account.

See more information on tax benefits on the VCLP, ESVCLP and AFOF pages.

For VCLPs, eligible foreign investors pay no capital gains tax on their share of returns the fund makes from eligible venture capital investments. For information on tax benefits go to the VCLP page.

For ESVCLP, investors pay no tax on their share of returns (capital or income) when the fund disposes of an eligible investment. Limited partners receive a non-refundable tax offset of up to 10% for their eligible contributions. For information on tax benefits go to the ESVCLP page.

For AFOFs, eligible foreign investors pay no capital gains tax on their share of returns the fund makes from eligible venture capital investments. For information on tax benefits go to the AFOF page. 

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For investors of the partnership to receive their tax benefits, the disposal must be made while the partnership is registered, within the 15 or 20 year maximum period as is relevant. See section 9-1(1) (c ) VC Act. 

All partnerships must complete: 

• quarterly returns
• annual returns.

ESVCLPs also need to complete:

• annual reports.

See more about reporting requirements in the Complete your reporting section below.

ESVCLPs need an appropriate investment plan. The investment plan needs to:

• set out the partnership's intended investment activities; and
• show that the investment activities focus on making eligible venture capital investments in early stage businesses.

Once registered, you’ll need to make sure your investments are in line with your investment plan.

Investment plan updates

Conditionally registered or registered ESVCLPs can amend their investment plan. To do this, you need to provide an updated copy of the investment plan to the department for consideration. The plan will then need to be approved by IISA.

Note: VCLPs and AFOFs also need an investment plan that outlines their intended investment activities as part of its partnership agreement, but this doesn't need to be approved by IISA. 

VCLPs, ESVCLPs and AFOFs are responsible for the eligibility of their investments. Eligibility can be found under the subdivision 118-F of the ITAA 1997. Some key areas are as follows.

For ESVCLPs and VCLPs, your investments must:

• be in an Australian business or unit trust (see Exception to Australian location test)
• be in the form of new shares or units, or options to acquire shares or units or convertible notes with equity characteristics (see SAFE note); or
• be a debt interest that is a permitted loan.

The business or unit trust you are investing in must:

• have at least 50% of its employees and at least 50% of its assets in Australia
• have a registered auditor, if the entity value is more than $12.5 million
• be unlisted (or will be delisted within 12 months if a VCLP investment)
• in the case of holding companies, partnerships must ensure the target investee meets the investment requirements.

ESVCLPs must also comply with the approved investment plan and make investments into businesses that are in the early stage of development. This can be:

• pre-seed
• seed
• start-up
• early expansion.

The investment must not be in a business if the business’s predominant activity is:

• property development
• land ownership
• finance (see Fintech amendments)
• insurance (see Fintech amendments)
• construction or infrastructure
• to make investments to receive interest, rents, dividends, royalties or lease payments (see Fintech amendments).

For AFOFs:

• its only investments are investments in an ESVCLP, VCLP or eligible venture capital investments in a company in which an ESVCLP or VCLP (in which the AFOF is a partner) already holds an investment
• the only debt interests held by it are permitted loans.

Investments subject to certain circumstances

Fintech amendment

Fintech amendments have been made to the ITAA 1997 and VC Act to allow investments in finance and insurance businesses where a specified activity is a substantially novel application of one or more technologies.

Australian location test

There is provision for a partnership to invest up to 20% of its committed capital in businesses that do not meet the Australian location test. Investments are considered cumulatively, and each investment must be revalued at the time of a subsequent foreign investment. 

SAFE note investments

A SAFE (simple agreement for future equity) note is a convertible security that allows the investor to buy shares in a future equity round. To be an eligible venture capital investment, a SAFE note must: 

• have the characteristics of a convertible note
• not be a debt interest.

See SAFE note investments.

Debt interests

Every debt interest the partnership owns is, and continues to be, a permitted loan. For more information, see your customer information guide.

Once established, your partnership needs to meet the following eligibility criteria to remain registered as either an ESVCLP, VCLP or AFOF as per the VC Act.   

General eligibility requirements

• Has a general partner(s) that is a resident of either Australia or a country with which Australia has a double tax agreement.
• Only conducts activities related to being a VCLP, ESVCLP or AFOF.
• Ensures the partnership remains in existence for more than 5 years and less than 20 years.
• For ESVCLP, has access to appropriate venture capital management expertise.

Partnership agreement requirements

• 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 that outlines its intended investment activities.

Investment plan requirements

• ESVCLPs need an appropriate investment plan focused on making early stage venture capital investments. This plan must be approved by IISA or its delegate.

Committed capital requirements

• ESVCLPs and VCLPs must have at least $10 million committed capital.
• ESVCLPs must have no more than $200 million. Not relevant to VCLPs.
• For ESVCLPs, a limited partner (or associates) cannot provide more than 30% of a partnership's committed capital without IISA's prior approval.
• For AFOFs, there is no minimum capital requirement. However, the general partner must advise that the partnership has sufficient capital to begin its investment plan.

Over the lifetime of your partnership, you must update the department on any changes that could affect your registration as an ESVCLP, VCLP or AFOF. These changes relate to the following.

Identified partnership members and contact details

We only give information to identified partnership members, so contacts need to be kept up to date. If we can’t contact you, you may miss important updates and impact your ability to meet registration obligations.

ILP certificate changes

If information on the ILP certificate has changed, then the partnership must provide a copy of the updated ILP certificate to the department for processing. This includes changes to: 

• the name of the partnership
• who the General Partner(s) is
• the registered address.

Investment plan updates

Registered ESVCLPs can amend their investment plan by notifying the department of any changes to the document. This update will then need to be approved by IISA.

Converting foreign currency to AUD

The currency conversion should be at the time of investment or valuation. The partnership will need to provide their rationale and evidence of their conversion if requested. 

Conversion of convertible notes to equity

The conversion of a convertible note should not be reported as a new investment on the investment tab in all returns. Information about the conversion can be reported when a disposal of the investment occurs.

Disposal of a permitted loan

Put the interest into the 'Other proceeds' field in the disposals tab. A loan must be repaid within 6 months if it is the first investment into the investee or unless the partnership has an extension approved by IISA.

The department will also contact partnerships as they reach the end of the 15/20 year limit, as relevant.

Investing through a holding company

If the investment has been made through a holding company structure, then report the details of the target investee in the investment warrant tab, not the details of intermediate holding companies.

At the end of your registration, you need to complete wind-up activities. Wind-up activities are standard business practices as per your individual partnership deed and your state registration as a Limited Partnership. 

The department will also contact partnerships as they reach the end of the 15/20 year limit.

Partnerships may request revocation at any time before their registered ESVCLP, VCLP or AFOF expires.

There's legislation, external links, detailed guides and more you’ll need to use during your time as a partnership. Some of these which are relevant to all partnerships include:

• Venture Capital Act 2002 (VC Act)
• Income Tax Assessment Act 1997 (ITAA 1997)
• Industry Innovation and Science Australia (IISA)
• Venture Capital dashboard

See the program pages for guidelines and more resources on each partnership type:

• Early Stage Venture Capital Limited Partnerships (ESVCLP)
• Venture Capital Limited Partnerships (VCLP)
• Australian Venture Capital Fund of Funds (AFOF)

We are here to help. If you can’t find information you need, or you feel stuck, contact us at venturecapital@industry.gov.au.