Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 118 - Exemptions  

Subdivision 118-F - Venture capital investment  

Operative provisions

SECTION 118-408   Partial exemption for some capital gains otherwise fully exempt under section 118-407  

118-408(1)    
Despite section 118-407 , you get only a partial exemption for a *capital gain from a *CGT event relating to an *eligible venture capital investment if:

(a) apart from this section, all of your share in the capital gain from the CGT event relating to the investment would be disregarded under section 118-407 ; and

(b) at the end of an income year to which subsection (4) applies (a valuation year ), the sum of the values of:

(i) the assets of the company or unit trust in which the investment is made; and

(ii) the assets of each other entity that is a *connected entity of the company or unit trust;

exceeds $250 million; and

(c) the CGT event happens after:

(i) if there is only one valuation year - the end of the period of 6 months after the end of that valuation year; or

(ii) if there is more than one valuation year - the end of the period of 6 months after the end of the earliest of those valuation years.

118-408(2)    
If subsection (1) applies, work out your *capital gain using the formula:

Normal capital gain − Valuation year capital gain

where:

normal capital gain
is what your *capital gain from the *CGT event would be apart from section 118-407 and this section.

valuation year capital gain
is the capital gain you would have made in relation to the *CGT event if the CGT event had happened:

(a) if there is only one valuation year - at the end of the period of 6 months after the end of that valuation year; or

(b) if there is more than one valuation year - at the end of the period of 6 months after the end of the earliest of those valuation years.

Work out the capital gain based on what the *capital proceeds would have been, and on other matters relating to the amount of the gain being determined on a reasonable basis, if the CGT event resulting in the gain had happened at the end of that period.

118-408(3)    
Despite subsection (2), you are taken not to have a *capital gain, or a *capital loss, from the *CGT event if the amount worked out under the formula in that subsection would be less than zero.

118-408(4)    
This subsection applies to any income year that:

(a) precedes the income year in which the *CGT event happens; but

(b) does not precede the income year in which the investment was made.

Note:

There must always be at least one valuation year, because paragraph 118-407(1)(d) ensures the CGT event will not happen in the year the investment was made.

118-408(5)    
Section 118-407 does not apply in relation to a *CGT event if this section applies in relation to the CGT event.