Key Takeaways
- • The Treasury Laws Amendment (Tax Reform No. 4) Bill 2026, introduced on 27 October, would lift the VCLP asset threshold 92%, from $250 million to $480 million, effective 1 July 2027.
- • The ESVCLP asset threshold would rise from $50 million to $80 million, and its committed capital limit from $200 million to $270 million, while the full exemption threshold for ESVCLP returns would climb 68% to $420 million.
- • The venture capital changes are Schedule 3 of a five-schedule bill, and passage depends on Labor securing Greens or crossbench support in the Senate.
- • The Greens have tied their support to the R&D changes, specifically demanding oil and gas companies lose access to about $350 million a year in R&D tax credits.
- • Until the bill passes, existing thresholds continue to apply, leaving fund managers planning around 1 July 2027 facing uncertainty.
Summary
Australia's proposed tax reform would significantly widen the range of companies eligible for tax-advantaged venture capital. According to Kalkine, Schedule 3 of the Treasury Laws Amendment (Tax Reform No. 4) Bill 2026, introduced on 27 October, lifts the asset thresholds for both venture capital limited partnerships (VCLPs) and early stage venture capital limited partnerships (ESVCLPs). The figures are drawn from a September exposure draft and are reported as unchanged in the introduced bill.
VCLPs, which generally target later-stage investment, would see their asset threshold rise from $250 million to $480 million, an increase of 92%, from 1 July 2027. Their concessions mainly benefit eligible foreign investors, whose gains on eligible investments can be exempt from Australian tax. ESVCLPs, which target younger companies, would see their asset threshold rise from $50 million to $80 million, up 60%, and their committed capital limit rise from $200 million to $270 million, up 35%. The full exemption threshold for ESVCLP returns would increase from $250 million to $420 million, up 68%. ESVCLP investors receive flow-through tax-exempt treatment on income and gains, plus a possible 10% non-refundable offset on contributions.
The change would allow funds to continue backing successful companies as they grow. Kalkine notes that an asset threshold set too low can force concessional funds to stop supporting their best performers just as those companies need more capital, leaving later funding rounds to investors outside the schemes. Eligibility will still depend on activity type, asset and employee location, and structure.
The bill's passage is uncertain. Treasurer Jim Chalmers said the bill "provides more certainty for investors and more incentives for innovation." Labor controls the lower house but needs the Greens or crossbench in the Senate. The other schedules include a 50% CGT discount for innovative start-up equity, an R&D Tax Incentive overhaul from 1 July 2028, optional monthly PAYG instalments and electric car FBT changes. The venture capital measures have drawn less public opposition than the R&D changes, but their fate is tied to the broader bill. No Senate committee reporting date has been confirmed, and the Explanatory Memorandum is expected to confirm final figures and how they apply to existing funds.
VCLPs, which generally target later-stage investment, would see their asset threshold rise from $250 million to $480 million, an increase of 92%, from 1 July 2027. Their concessions mainly benefit eligible foreign investors, whose gains on eligible investments can be exempt from Australian tax. ESVCLPs, which target younger companies, would see their asset threshold rise from $50 million to $80 million, up 60%, and their committed capital limit rise from $200 million to $270 million, up 35%. The full exemption threshold for ESVCLP returns would increase from $250 million to $420 million, up 68%. ESVCLP investors receive flow-through tax-exempt treatment on income and gains, plus a possible 10% non-refundable offset on contributions.
The change would allow funds to continue backing successful companies as they grow. Kalkine notes that an asset threshold set too low can force concessional funds to stop supporting their best performers just as those companies need more capital, leaving later funding rounds to investors outside the schemes. Eligibility will still depend on activity type, asset and employee location, and structure.
The bill's passage is uncertain. Treasurer Jim Chalmers said the bill "provides more certainty for investors and more incentives for innovation." Labor controls the lower house but needs the Greens or crossbench in the Senate. The other schedules include a 50% CGT discount for innovative start-up equity, an R&D Tax Incentive overhaul from 1 July 2028, optional monthly PAYG instalments and electric car FBT changes. The venture capital measures have drawn less public opposition than the R&D changes, but their fate is tied to the broader bill. No Senate committee reporting date has been confirmed, and the Explanatory Memorandum is expected to confirm final figures and how they apply to existing funds.
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