The venture capital industry has struck a regulatory barrier in its plans to attract overseas investment into Australian funds, prompting a political tussle that could determine whether Australian start-ups gain access to fresh capital.
The obstacle, part of the Federal Government's sweeping tax review, appears likely to discourage overseas pension funds from investing in Australian venture capital vehicles.
It is expected to restrict the way Australian venture funds raise capital from corporations and wealthy individuals, the key investors who supplement the investment raised from local superannuation funds.
"It's limiting the freedom of managers to source their funds," said Mr Allan Aaron, the executive director of Technology Venture Partners, a venture fund in Sydney. "That can't be a good thing for the diversity of investment or the quantity of investment."
