AUSTRALIA - The Australian venture capital industry has welcomed a new government programme to attract global private equity to the region.
The Australian Government's new rules will introduce tax concessions for international investors - including endowment funds and venture capital fund-of-funds vehicles - with the aim of attracting more partnerships.
The rules will treat new investors in the same way as overseas pension funds by exempting them from capital gains tax on their investments. The move puts Australia in line with tax treatment in other developed markets, including the US and the UK.
The plans also extend this rule to taxable non-residents holding less than 10% of a venture capital limited partnership.
Peter Chapman, chairman of the Public Policy Committee of the Australian Venture Capital Association Limited (AVCAL) and chief executive of Rothschild Australia Capital Investors described the initiative as “a breakthrough development”.
AVCAL - which will work closely with the government to implement the move - believes that the Australian Government's reforms are especially important because they encourage investment by international funds of funds. The firm touts a figure of around $AUD1bn worth of potential foreign investment pouring into Australia's venture capital funds.
The proposals have also been applauded by Venture Economics, the New Jersey-based global private equity research company:
These changes will be enormously beneficial to the venture capital market in Australia, said Jesse Reyes, vice president of Venture Economics.
We're confident that these international funds of funds and tax-exempt organisations, which had previously been reluctant to invest in Australian private equity because of the unfriendly regulatory regime in place, will look positively upon the changes that bring... .”
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