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

Australian Government Venture Capital 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 Tax Concession 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 on profits on eligible investments. • ESVCLP: all investors are exempt from tax on 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 on 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 • Founded in Sydney in 2009 Shoes of Prey • Now a global, multi-channel retail brand for shoppers to design their own 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 www.shoesofprey.com months and hit multi-million dollar revenue in under two years

Australian Government Venture Capital Tax Concession Programmes • Established in June 2005 – University Spinifex Pharmaceuticals of 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 www.spinifexpharma.com • Sold to Swiss pharmaceutical giant Novartis for US$200 million upfront – eligible for up to US$500 million in additional milestone payments

Australian Government Venture Capital Tax Concession Programmes • Established in 2007 - Melbourne’s Global Kinetics 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 www.globalkineticscorporation.com.au 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

Australian Government Venture Capital Tax Concession Programmes • Established in 2006 – spin-out of Fibrotech Therapeutics 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 www.fibrotech.com.au • 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

Australian Government Venture Capital Tax Concession Programmes • Founded in 2004 – University of South Cohda Wireless 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 www.cohdawireless.com • 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

Australian Government Venture Capital Tax Concession Programmes • Formed in August 2011 – University of Vaxxas 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 www.vaxxas.com 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