I read with great interest the suggestion of the MD of Bioscience Managers, Jeremy Curnock Cook, (BRW, “Guarantee them and venture capital investments will come”) that the federal government should be providing a guarantee over venture capital investments made in Australia, along the same lines as the deposit guarantee provided to our banking system. Sounds terrific and I commend Jeremy for the suggestion and wish him well in his pursuit. Anything that encourages superannuation funds to allocate more to Australian venture capital investment should be a good thing.
Perhaps not. It is important that we don’t loose sight of the greatest long-term benefit for the sake of pursuing short-term goals, and a strategy such as this would at least require a lot more analysis before we know how it would play out in the longer term. My fear is that it would be blindly throwing solutions up and while this might just be the long-term solution because it is a blind leap of faith it is just as likely to be detrimental as beneficial.
Besides it is a proposal that is never going to see the light of day and I can say that with complete assurance because anyone that has reviewed the report and recommendations of the Board of Taxation, Review of taxation arrangements under the Venture Capital Limited Partnership regime, will be aware the issue of permitting Capital Gains Losses to be recognised under this regime was considered but not recommended by the Board.
The reasoning was simple in that the implication of permitting recognition of Capital Losses would have a revenue impact, particularly given that, on the historic basis of venture capital performance, the likelihood of capital losses is substantially greater than capital gains. Now the Board’s review is a specific regime, VCLPs and ESVCLPs, and therefore does not simply carry across, however, the importance of revenue impact is consistent.
Mr Cook would most likely have been aware of this as he almost certainly had reviewed the Board’s report and recommendations, if not and he seeks advice on this matter we would be more than happy to discuss it with him.