ABSTRACT
The Australian federal government has a long-standing commitment to encouraging investment in small and medium sized enterprises (SMEs). The chapter examines the operation of the tax system and proposals for reform in relation to investments in SMEs, rather than with taxation of SMEs themselves. The term 'SME' is often used to identify enterprises having particular characteristics which may be different from the general corporate sector. Different types of concessions are likely to affect investment in SMEs in different ways. Investment can occur either directly or indirectly through an intermediary. The major source of funds for venture and development capital funds is superannuation funds investment, which represents about 35" of funds under management. The Pooled Development Fund program was introduced in 1992. The rate for superannuation funds is said to compare closely with the lowest effective rate of tax to apply to individuals.
