Limited Partnerships in Australia: Guide for 2025

Limited Partnerships (LPs) have long been a staple for venture capital, private equity, and professional investment structures around the world. In Australia, LPs are increasingly on the radar for entrepreneurs, investors, and financial advisers seeking flexible structures for pooling capital while managing risk. With the Australian Taxation Office (ATO) introducing new compliance rules in 2025, it’s time to revisit how LPs work, their tax implications, and why they might (or might not) be right for your next business venture.

How Limited Partnerships Work in Australia

At its core, a Limited Partnership is a business structure where at least one partner (the general partner) manages the business and is personally liable for its debts, while one or more limited partners contribute capital and enjoy limited liability—meaning they’re only on the hook for their original investment.

• General Partner: Responsible for day-to-day management. Unlimited liability.

• Limited Partners: Passive investors, no management rights. Liability capped at their investment.

LPs are registered at the state or territory level—most commonly under the Partnership Act 1892 (NSW) or similar legislation elsewhere. They are not separate legal entities like companies, but the structure is specifically designed for flexibility and risk allocation.

In 2025, interest in LPs has surged due to their use in startup funds, agribusiness, and cross-border investments, particularly as they can enable foreign capital participation with clearer risk boundaries.

2025 Regulatory and Tax Changes Affecting LPs

The ATO has made several updates for the 2024–2025 financial year to clarify the treatment of LPs, particularly around international tax compliance and reporting:

• Enhanced Disclosure: LPs with offshore partners must now provide more granular reporting on beneficial ownership and capital movements, aligning with global anti-money laundering (AML) standards.

• Tax Transparency: LPs continue to be treated as tax-transparent for most purposes, meaning income is generally assessed at the partner level, not the partnership level. However, foreign limited partners may face new withholding tax rates under the updated Income Tax Assessment Act 1936 changes for 2025.

• Venture Capital Incentives: Certain LPs registered as Early Stage Venture Capital Limited Partnerships (ESVCLPs) can access expanded tax concessions for qualifying investments made after July 2024, including increased capital gains tax (CGT) exemptions and investor offsets.

For example, a venture fund set up as an LP in Sydney with a mix of Australian and Singaporean investors will need to comply with new beneficial ownership declarations and may be eligible for improved CGT concessions on qualifying startup exits.

Pros, Cons, and Real-World Use Cases

LPs are not for everyone. Here’s how they stack up for different scenarios in 2025:

Pros:

- Attracts passive investors with limited liability.

- Flexible capital raising—partners can enter or exit more easily than with a company.

- Widely accepted for VC/PE funds and joint ventures, especially where international participation is key.

- Tax transparency can be an advantage for sophisticated investors.

Cons:

- General partners face unlimited liability—often requiring a corporate entity as GP to manage risk.

- Not ideal for small businesses or those seeking simple structures.

- Compliance burden is rising, especially for cross-border LPs.

- Limited partners cannot participate in management—risk of disputes over control and strategy.

Case Study: In 2025, a renewable energy project in regional Victoria raised $20 million via an LP, allowing international institutional investors to participate while a local management team (as the general partner) handled operations. The LP structure provided tax transparency for investors, but required careful compliance with the new ATO reporting regime and AML rules.

Is a Limited Partnership Right for You?

Limited Partnerships offer significant advantages for sophisticated investors and high-growth ventures, but they come with complexity. The 2025 regulatory environment demands more rigorous reporting, especially if your investors are overseas. For startup founders, LPs can be a powerful tool for raising capital and attracting global partners—provided you have the right legal and accounting advice.

If you’re considering an LP, weigh the benefits of flexibility and tax transparency against the growing compliance requirements and potential management challenges. For many Australian ventures, particularly in tech, agriculture, and infrastructure, LPs remain an attractive—if nuanced—choice.