Phase Out of Federal Labour-Sponsored Venture Funds Capital Tax Credit

The 2013 Federal Budget announced the phase-out of the Federal Labour Sponsored Venture Capital Funds Tax Credit (LSFTC) which will affect claims for taxation years 2015 and 2016.

The current credit rate of 15% of eligible investments (to a maximum of $750 per year) will still be available for taxation years 2013 and 2014 but will be phased out as follows:

On November 22, the Department of Finance released technical proposals relating to the phase-out. Public consultations on the phase-out were conducted between May 23 and July 23 of this year. The proposed technical amendments were based on these consultations. 

The proposed amendments will affect how Labour Sponsored Venture Capital Corporations (LSVCC) discontinue their business. However, the new rules do not remove the existing penalty applicable to shareholders who redeem shares held for fewer than 8 years before the discontinuance of the LSVCC’s venture capital business.