🏟️ESVCLP

Early Stage Venture Capital Limited Partnerships

This is an Australian business structure.

Benefits

• Income/capital gains from the disposal of eligible venture capital investments are exempt from tax in Australia in the hands of domestic and foreign investors

• Allows fund managers to pool capital

• Allows to raise new venture capital funds of between $10 million and $200 million

• To invest in innovative early-stage businesses

• offers tax benefits to fund managers and investors

Important facts

• The investments must also meet other criteria and be held for a minimum of 12 months.

• An ESVCLP must be a new partnership rather than a restructured existing partnership.

Who is the governing body

Innovation and Science Australia's Innovation Investment Committee

Can invest in startups in the following stages of development

• pre-seed

• seed

• startup

• early expansion

Tax benefits

For investors

• Partnership itself is not taxed and the income and gains flow through to investors. (avoids double taxation/franking)

• Exempt from tax on income and gains from eligible early stage venture capital investments

• Exempt from tax on income and gains from disposing of eligible venture capital investments

For fund managers

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

Non-refundable carry forward tax offset

Flow-through tax structure is where income is passed through a business straight to its shareholders, owners, or investors. As a result, only the individuals, not the business, are taxed on the revenue

Revenue account

Carried interest

Capital account