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March Newsletter
Dear AVCAL Colleague,

We've been very busy at AVCAL with (yet more) tax submissions and consultations as well as a series of events which are selling out almost as soon as we open registrations.

Tax Update

Board of Taxation CIV Review

AVCAL prepared a lengthy submission to the review by the Board of Taxation on Collective Investment Vehicles. This included a substantial portion on the ES/VCLP. The Board will report on the whole review by December this year but after requests from AVCAL to the Assistant Treasurer, they will bring forward the report on VCLP to July. The AVCAL submission can be downloaded here.

AVCAL's submission was coordinated by E&Y with input from Deloitte, Greenwoods, KPMG, Freehills, PwC and Mallesons. Thanks to all of them for their help.


On 1 December 2010 the ATO released two new draft determinations D7 and D8 ("the draft TDs") which sought industry views on the question of what constitutes "Australian source" and how the business profits article in Australian tax treaties apply to Australian sourced business profits of foreign limited partnerships where the partners are residents of tax-treaty countries that treat the limited partnership as fiscally transparent.

AVCAL has engaged in extensive discussions with officials from the ATO, and have been working collaboratively with other professional bodies and industry participants to assess the potential implications - and particularly the operationalisation - of these draft TDs as they currently stand.

On 2 March 2011, we discussed these issues at length with senior officials from the ATO, together with senior representatives from the ICAA, Tax Institute and the big 4 accounting firms. Below are some of the key points arising from the meeting:

On D7:

The ATO acknowledged that the debate on source determination is ongoing. However, the key message intended for industry participants was that the ATO did not want taxpayers to have the impression that merely signing the relevant contracts outside of Australia was sufficient to ensure non-Australian source. Further engagement will be necessary to provide the ATO with a sufficiently comprehensive understanding of where the "value add" is derived in the context of large international funds.

On D8:

In recent months the ATO has been engaging with PE managers operating in Australia (particularly those with a significant proportion of overseas investors) to better understand the level of information available to GPs on tracing through their LPs' countries of residence.

All parties agreed that further guidance was needed on how the ATO would seek to trace ownership through foreign entities so that it would be satisfied that the appropriate majority of PE investors are indeed residents of treaty countries. The ATO may issue a Practice Statement soon to provide this guidance.

Given the difficulties in tracing through fund-of-funds and non-transparent vehicles, it was suggested that the ATO may not require tracing through more than say the first or second tier of LP investors if they are satisfied that the appropriate majority had been reached. We suggested to the ATO that they engage with the larger fund-of-funds to arrive at a feasible and streamlined approach to providing such tracing details, so that their Australian GPs need not all go through the duplicative verification exercise with their fund-of-fund LPs independently.

It has not yet been determined what the ATO would consider an appropriate majority of investors that are traceable to their countries of tax residence. Indications are that the ATO will take a sensible approach to this, but have not yet arrived on an appropriate treaty resident materiality threshold. One example given was that it would not be satisfactory if, say, 70% of a fund's investors could be traced but the remaining could not, for various reasons.

Some of the issues that still need to be worked through include:

- The apportionment of taxes on distributions to LPs where a proportion of LPs are resident in non-treaty countries, and how to capture the tax payable by the non-treaty resident proportion. The ATO recognises that some non-treaty investors may choose not to invest in Australian assets for tax reasons once these determinations are in effect.

- Dealing with the issue of non-transparent LP vehicles. The ATO also maintains that any interposed entities would need to demonstrate an acceptable commercial purpose. It was suggested that an acceptable commercial purpose might be the aggregation of capital from a number of tax treaty jurisdictions. However, if such entities were used for foreign or domestic tax planning purposes then there is some doubt as to whether this constitutes an acceptable commercial purpose.

The ATO hopes to finalise all of its processes by mid-2011.

AVCAL supports the ATO's recognition of the OECD Model Tax Convention on Income and on Capital, but believe that in its current form the draft TDs have yet to fully consider the range of structures and globally accepted practices by global investors, and related operational issues. These considerations are necessary to provide a sufficiently high level of certainty to PE investors and managers with investments in Australia. In our representations to the ATO we reiterated the points made in the joint submissions by CPA Australia, ICAA, NIA, the Taxation Institute of Australia and Taxpayers Australia on drafts D7 and D8 (click on the links to view these submissions).

AVCAL will continue to seek to work with the ATO collaboratively on these issues, including in its development of a sensible tracing approach.

International Regulatory Issues

There are a number of international regulatory issues developing at the moment. Updates to most of these will be covered in our upcoming CFO Forum. The European AIFMD is working its way through implementation issues. The registration with SEC (Dodd-Frank) is going through a consultation phase. The SEC registration has the potential to impact a number of AVCAL members who have US investors. And finally, for those who hope to fund-raise in the UAE, there are potential issues about which AVCAL has co-signed a submission developed by the Private Equity and Growth Capital Council (US).

AVCAL Research Prize winners announced
AVCAL recently announced the winners of its inaugural research prize for best PE paper to Pi-Shen Seet (Flinders University) and Christopher Graves (University of Adelaide) for their paper, "Opportunities for Private Equity Investment in Family Enterprises". The prize for best VC paper was awarded to Asif Siddiqui (University of Sydney) for his paper "Venture Capital Syndication in Australia: Patterns and Implications."
A few recent events

Our annual golf day was an enormous success last week. Thanks to Octet Finance for their support of the event. Our last few case study events have resulted in great feedback and have sold out. Our first VC101 was a sell out as well. Thank you for your support.
Winners of our AVCAL Corporate Golf day. From left to right Clive Isenberg the Director of Octet Finance, the winning team, Gerry Mahony, Mark Payne, Peter Opie & Ron Younan
The next few events are at maximum numbers, so best register early for any of our upcoming events. Scroll down to see the next networking and professional development events.

Do you have copies of old AVCAL Conference programs?

We're seeking to make our archive complete and to compile a collage of all of the past AVCAL conference programs. We are seeking programs for the last 18 years. We are after a copy of our 2003 and 2004 programs as well as programs for all conferences held before AVCAL 2000. We will return them after scanning them. Please contact us to let us know if you can help.

AVCAL 2011 Conference, Gold Coast, 21-22 September 2011

We'll be officially launching our 18th annual conference on 30 March 2011. This will provide you with a snapshot of the draft program, pricing and everything you need to know to be registration-ready. Our infamous list of "things we've heard at the registration desk" will be included then. Given the recent popularity of all of our networking events, we suggest that it will be very important to be registration-ready for conference. We are expecting that it will sell out very quickly.

Key dates for your diary

Remember that you must be a paid-up member of AVCAL to register and attend the conference.

Partner-only registration opens - 17 May 2011
All other member registrations - 31 May 2011
Conference Golf - 20 September 2011
Conference - 21-22 September 2011

We've included some tips on our website to ensure that you're registration ready.

Kind Regards

Chief Executive

Latest Policy and Research News

Treasury releases Discussion Paper on Improving the Taxation of Trust Income
On Friday 4 March, 2011, Assistant Treasurer Bill Shorten announced the release of a discussion paper on improving the taxation of trust income, including the Government's commitment to ensuring that the flexibility to stream income to particular beneficiaries can continue.

Overview of Australia's venture capital industry
Read this interview of AVCAL CEO Dr. Katherine Woodthorpe on the Australian venture capital industry in the March issue of Business Review Australia.

Australia: 7th most attractive country for VC and PE investment
Australia is the 7th most attractive country for investors in VC and PE, according to the 2011 Global VC and PE Country Attractiveness Index just released by IESE and sponsored by Ernst & Young.

Advent invests additional capital into IPG
Advent Private Capital on 22 February, 2011, announced an additional investment of $50m into their portfolio company, Integrated Packaging Group (IPG). The additional investment resulted in the complete buyout of Hastings Private Equity, which left Advent and company management owning 100% of IPG.

Preqin Special Offer for AVCAL Members
Preqin is offering AVCAL members the chance to subscribe to their services at a discounted rate. First-time subscribers will receive a USD 250 discount on any product or publication worth USD 1000 or more.

Send us your news!

With deal and fundraising activity picking up, we're keen to ensure our readers can stay up to date with the latest developments on this front. If you are a GP, do send us your news releases on your latest activities, or success stories, and we will be happy to post them up on our website and in future newsletters.

AVCAL Professional Development for 2011

We have a busy program scheduled already for the first half of the year and places on some programs are filling fast!

Proudly Partnered by Corrs Chambers Westgarth
Sydney - 25 March 2011. SOLD OUT
Melbourne - 6 May 2011. Register now

**NEW** PE101
Sydney - 17 June 2011.
Register now

AVCAL Networking for 2011
The Forum Group (TFG) are AVCAL's event partner for our annual conference. TFG were awarded 'Best Meetings Management Less Than 8 Employees' and 'Best Event Management Organisation' at the 2010 Meetings and Events Industry of Australia NSW Gala Awards Dinner held a few weeks ago.

The MEA Awards recognise excellent business practice in the Meetings and Events Industry. They encourage Industry professionals to excel in the achievement of their business and personal goals, and reward those who achieve outstanding results.

If you are contemplating outsourcing your event management or just need extra support with your own, contact Leanne Constantino
United Malt Holding Case studies
Proudly Partnered by Mallesons Stephen Jaques
Sydney - 9 June 2011. Register now
Brisbane - 11 August 2011. Register now

Peplin Case Study Series
Proudly Partnered by Corrs Chambers Westgarth
Brisbane - 8 April 2011. Register now
Melbourne - 22 July 2011. Register now

Mark your diary
AVCAL Conference 2011, Gold Coast
Golf 20 September
Conference 21-22 September.
More information here

Other Events
PEI Media Book Launch
The Guide to Responsible Investment provides practical ESG guidance from over 25 industry experts. AVCAL members receive 15% off, quote AVRI15 to redeem.
Funding Connect 2011
Melbourne, 29 March 2011.
Funding Connect provides attendees with a variety of options for their funding and investment needs in today's climate - from cash-strapping to funding through clients, from angel investors to strategic and VC funding.

Korea Private Equity
Friday, 1 April 2011
Invest KOREA is holding "Seizing Opportunity: Korea Cross-Border Investment Forum" to inform Australian investors on the latest opportunities to partner with Korea for mutually beneficial results.

The Mining Investment & Finance Fundamentals
This conference provides a critical in-depth review on maximising mining sector investment returns.
SYDNEY, May 31st - June 2nd 2011. 10% discount for AVCAL members.

Earth Hour

At 8:30 PM on Saturday 26th March 2011, AVCAL will participate when lights will switch off around the globe for Earth Hour. Click here for more information.


Ernst & Young

Pacific Strategy Partners


Castle Harlan








Archer Capital

Commonwealth Bank of Australia

BOS International

Champ Private Equity





Riverside Company

Pacific Road Capital Management

Propel Investments

Credit Suisse

Pacific Equity Partners


Norton Rose

NBC Capital



Capital IQ


AVCAL is the professionally managed industry body that promotes the Australian private equity & venture capital industry.

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