CGT changes could nearly double tax on venture capital manager profits
Venture capital managers' carried interest tax could rise from 23.5% to 47% under new CGT rules from July 2027.
Carried interest is the share of a venture capital fund's profits paid to managers, typically 20% once the original investment is returned. Managers currently pay about 23.5% tax on this.
From July 2027, new capital gains tax rules will increase the rate to as much as 47%. The government has proposed an Innovative Business CGT Concession to protect qualifying startup investments, keeping them at the lower tax rate.
Startup funds must remain invested for at least three years, and the startup must be less than 15 years old, with revenue under $50 million. A manager's profits could be split between the old tax rate for qualifying startups and the new higher rate for other investments.
Some managers have accused the government of shifting the rules midway through their investments.
- 23.5%
- Current tax rate
- up to 47% inc. Medicare levy
- Potential new rate
- July 2027
- Implementation date
- $58,750 on $250,000 carry
- Example additional tax
Why it mattersVenture capital managers taking home less from successful startups could discourage investment in early-stage Australian businesses.
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