Flow through tax incentives to encourage investment in venture capital funds
Provides tax incentives for Pooled Development Funds (PDFs) and their shareholders on income and gains derived from equity investments in Australian small and medium enterprises (SMEs).
PDFs are taxed at 15% on such income and gains, and shareholders are exempt from tax on income and gains from holding and disposing of PDF shares.
Fund managers of a PDF can make eligible investments by acquiring newly-issued shares in SMEs with total assets of not more than $50 million.
The investee company must have issued shares to raise capital to:
- establish a new business activity
- substantially expand production capacity or services
- or expand or develop markets
While a PDF holds an investment, it can enter into the following transactions with the investee company:
- acquiring non-transferable options to buy shares
- lending money
- charging management fees
PDFs are venture capital funds registered under the Pooled Development Funds Act 1992.
Registration is no longer available; funds registered under the PDF programme will continue to operate and invest in small Australian companies.
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Last updated: 12 February 2026