Australian Government Venture Capital Tax Concession Programmes - - PowerPoint PPT Presentation

Australian Government Venture Capital Tax Concession Programmes

Sample of companies supported by the Commonwealth’s VC programmes

Significant Investor Visa Presentation 13 August 2015

• ESVCLP & VCLP Programmes

– What are venture capital funds – Why and How of Registration – Compliance and Integrity framework

Australian Government Venture Capital Programmes

Two forms of Government intervention

• Tax Concession Programmes

– Venture Capital Limited Partnerships (VCLP) – Early Stage Venture Capital Limited Partnerships (ESVCLP) – Australian Venture Capital Fund of Funds (AFOFs) – Pooled Development Funds (PDF)

• Co-Investment Programmes

– Innovation Investment Fund (IIF) – Pre-Seed Fund (PSF) – Innovation Investment Follow-on Fund (IIFF) – Renewable Energy Venture Capital Fund (REVC) – ARENA

Australian Government Venture Capital Programmes

What is a venture capital limited partnership?

• A partnership of investors to pool their capital.
• A limited partnership where the (Limited Partners) are passive investors and the

venture capital fund manager (General Partner) makes investment decisions.

• An incorporated limited partnership (ILP) is a corporate entity to make high-risk /

high-return investments. An ILP must first be registered by the relevant State Government authority.

• The fund is not structured as a trust or a company.
• The ILP can seek registration as an ESVCLP or a VCLP
• to invest in early stage, growth and expanding

Australian companies.

Australian Government Venture Capital Tax Concession Programmes

Benefits of registration as an ESVCLP or VCLP

• ESVCLPs & VCLPs receive flow-through tax treatment

(the fund is not a taxing point)

• ESVCLP & VCLP fund managers (GPs) pay tax on ‘carried interest’ at capital

gains tax rates as opposed to company tax rates.

• VCLP: foreign investors are exempt from tax
• n profits on eligible investments.
• ESVCLP: all investors are exempt from tax
• n profits on eligible investments.

Australian Government Venture Capital Tax Concession Programmes

ESVCLP & VCLP Requirements Both ESVCLPs and VCLPs requirements:

• The GP must be a resident of Australia (or double tax agreement Australia).
• At the time of registration, the fund must not hold any investments, nor carry
• n other business for the duration of the registration.
• Be in existence for 5 to 15 years.
• A minimum $10 million committed capital

(VCLPs have no maximum limit, ESVCLPs have a maximum of $100 million). Conditional Registration

• Can be conditionally registered without $10 million for 24 months.
• If the capital is not raised, conditional registration lapses.
• ESVCLP - Investment Plan and Management team a condition.
• Tax benefits only apply with ‘full’ registration.

Australian Government Venture Capital Tax Concession Programmes

Additional ESVCLP requirements (see Customer Guides) ESVCLP fund requirements:

• No LP (investor) more than 30 per cent of the fund’s capital.
• Not be part of a larger fund.
• Have management team with appropriate venture capital expertise.
• New shares or options (VCLPs can invest in new, existing shares or options).
• No investment more than 30 per cent of the fund’s capital.

ESVCLP & VCLP investment requirements:

• Predominant activity is not: land development, finance, insurance, construction;

infrastructure or making investments.

• Assets $50 million (ESVCLP) or $250 million (VCLP) at time of investment.
• Held for minimum of 12 months.
• Held “at risk” while the fund is registered.

Australian Government Venture Capital Tax Concession Programmes

Registration as an ESVCLP or VCLP

• Innovation Australia approves registration under the Venture Capital Act 2002

(VCA); and the Income Tax Assessment Act 1936 and 1997 (ITAA36 or ITAA97).

• Applications require:

– An ESVCLP or VCLP application form (for a copy of the application form email: venturecapital@industry.gov.au). – An Investment Plan (ESVCLP). This is included in the application form, ensure you follow and address all criteria in Part D of the application form). – A Limited Partnership Deed with a certificate of registration as an Incorporated Limited Partnership from relevant State Government authority. – Individual investor Subscription Deeds (if seeking unconditional registration). – The fund’s Information Memorandum and any public offer documents.

Australian Government Venture Capital Tax Concession Programmes

Assurance for Compliance and Integrity

• At registration: condition and full.

– Eligibility criteria [Divisions 9, 11 and 13 VCA] – Applying for registration [Division 11, VCA] – Granting registration [Division 9, 11 and 13 VCA] – Conditional registration [s13-5(1), (1A) VCA] – Full registration [s13-1(1), (1A) VCA]

• During: quarterly and annual reporting.

– Maintaining registration [Division 9 VCA] – Reporting requirements [Division 15, s17-10]

• Customer assurance for compliance and integrity framework.

– Eligible investment [s118-F] – Revoking registration [Division 17 VCA]

Australian Government Venture Capital Tax Concession Programmes

QUESTIONS?

• Venture Capital Programmes:
• Graydon Smith – 13 28 46
• venturecapital@industry.gov.au
• Australian Private Equity and Venture Capital Association Ltd:
• www.avcal.com.au
• Australian Association of Angel Investors:
• www.aaai.net.au
• ESVCLP & VCLP Customer Guides and Fact Sheets:
• www.business.gov.au

Australian Government Venture Capital Tax Concession Programmes

www.shoesofprey.com

• Founded in Sydney in 2009
• Now a global, multi-channel retail

brand for shoppers to design their

• wn shoes online
• In the past year, 5 million unique

shoppers visited shoesofprey.com

• 5 million pairs of shoes designed on

the site

• Shoes of Prey now has five offices

globally and 150 staff

• The business broke even at two

months and hit multi-million dollar revenue in under two years

Shoes of Prey

Australian Government Venture Capital Tax Concession Programmes

• Established in June 2005 – University
• f Queensland
• Developing novel drugs for the

treatment and management of neuropathic pain

• Possible applications include

treatment of pain associated with diabetes, shingles and chemotherapy

• In 2014, US$45m was raised for

investment in phase IIb and three additional phase IIa studies

• Sold to Swiss pharmaceutical giant

Novartis for US$200 million upfront – eligible for up to US$500 million in additional milestone payments

Spinifex Pharmaceuticals

Australian Government Venture Capital Tax Concession Programmes

www.spinifexpharma.com

www.globalkineticscorporation.com.au

• Established in 2007 - Melbourne’s

Florey Institute of Neuroscience and Mental Health

• Commercialises innovative technology

for the monitoring of symptoms of neurological disease

• KinetiGraph™ device used by

neurologists to record and manage movement disorders such as Parkinson’s Disease

• Device approved for sale in the US,

EU, Australia and Asia

• Sales are growing: more than 110

sites around the world have implemented the GKC system

• Company recently closed A$15 million

financing round

Global Kinetics

Australian Government Venture Capital Tax Concession Programmes

www.fibrotech.com.au

• Established in 2006 – spin-out of

University of Melbourne

• Novel anti-fibrotic drug candidates for

the treatment of fibrosis prevalent in conditions such as chronic kidney disease, chronic heart failure, pulmonary fibrosis and arthritis

• In May 2014, sold to Irish

pharmaceutical company Shire for US$75 million upfront – with further milestone payments of US$482.5 million, bringing the total deal to US$557.5 million

Fibrotech Therapeutics

Australian Government Venture Capital Tax Concession Programmes

www.cohdawireless.com

• Founded in 2004 – University of South

Australia’s Institute for Telecommunications Research

• Cohda's radio applications aim to

make driving safer by eliminating human error on the roads

• Technology allows communications

from vehicle-to-vehicle and vehicle-to- infrastructure and safety warnings

• Cohda’s equipment and services

have: – major projects in Europe and the USA, – tested by GM, Toyota, Honda, Daimler, VW, Hyundai, TomTom, Audi, BMW, and Bosch

• Over 1 million vehicle-days of testing

Cohda Wireless

Australian Government Venture Capital Tax Concession Programmes

www.vaxxas.com

• Formed in August 2011 – University of

Queensland's Australian Institute of Bioengineering and Nanotechnology

• Next-generation vaccine delivery

platform to achieve a pain free way to deliver vaccines without needles and syringes

• The Nanopatch is a silicon patch the

size of an adult thumbnail – contains 10,000 or microscopic bumps on the surface of the patch coated in the vaccine

• AUD$40.6 million in capital raised
• World Health Organisation (WHO)

trialling Nanopatch for polio vaccines

• Working with US drug giant Merck on

another vaccine

Vaxxas

Australian Government Venture Capital Tax Concession Programmes