MEC is a registered Pooled Development Fund (PDF). PDF shareholders pay no capital gains tax on the sale of their PDF shares. Investors who receive dividends will also be exempt from income tax on dividends.
This can be particularly attractive to both traders and investors, since any profits derived from trades or investments are tax-free or low tax. The Pooled Development Fund Programme was established by the Federal Government to develop the market for patient venture capital for growing small and medium enterprises and to provide a concessional tax regime to encourage such investments. Any capital losses on the sale of PDF's are not deductable
To encourage investors, the government offers tax benefits to both the PDF and its shareholders as follows:
- capital gains made by PDF shareholders are not taxable,
- shareholders can elect to treat dividends paid by a PDF as tax free,
- a PDF pays a corporate tax rate of 15% on PDF income and 25% on other income.
PDF's tend to invest in a portfolio of growing companies, thereby potentially reducing investors' risk through diversification. Investee companies have the potential to become listed companies in their own right, which has the possibility of providing investors with attractive returns.
This is not a complete list of the taxation issues surrounding Pooled Development Funds. For further information please contact AusIndustry.