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 118-410   Exemption for certain foreign venture capital investments through Australian venture capital funds of funds  

Gains or losses as a partner in a VCLP or an ESVCLP

118-410(1)    
All of your share in a *capital gain or a *capital loss from a *CGT event is disregarded if:

(a) you are an *eligible venture capital partner in a *limited partnership; and

(b) the CGT event relates to an *eligible venture capital investment made by a *VCLP, or an *ESVCLP in which the partnership is a partner; and

(c) when the investment was made, the partnership was an *Australian venture capital fund of funds that was *unconditionally registered; and

(d) when the investment was made, the VCLP or ESVCLP was unconditionally registered; and

(e) at the time of the CGT event, the partnership:

(i) was an Australian venture capital fund of funds that was unconditionally registered; and

(ii) in the case of a capital gain - met all of the *registration requirements of an AFOF that are not *investment registration requirements; and

(f) at the time of the CGT event, the VCLP or ESVCLP:

(i) owned the investment; and

(ii) had owned the investment for at least 12 months; and

(iii) was unconditionally registered; and

(iv) in the case of a capital gain - met all of the *registration requirements of a VCLP, or all of the *registration requirements of an ESVCLP, (as the case requires) that are not investment registration requirements.

Note:

The registration requirements of an AFOF are set out in section 9-5 of the Venture Capital Act 2002 . It is important to understand that this is a separate requirement from registration under Part 2 of that Act (which effectively determines whether an entity is an AFOF).

It is technically possible to be registered under Part 2 of that Act without meeting the registration requirements of an AFOF, but you might still not be entitled to exemption under this section.

Gains or losses from direct investments

118-410(2)    
All of your share in a *capital gain or a *capital loss from a *CGT event is disregarded if:

(a) you are an *eligible venture capital partner in a *limited partnership; and

(b) in the case of a capital gain - the CGT event relates to an *eligible venture capital investment that the partnership made in a company, or a unit trust, in which a *VCLP, or an *ESVCLP, of which the partnership is a partner, owns one or more eligible venture capital investments; and

(c) when the investment was made, the partnership was an *Australian venture capital fund of funds that was *unconditionally registered; and

(d) when the investment was made, the VCLP or ESVCLP owned one or more eligible venture capital investments in the company referred to in paragraph (b); and

(e) at the time of the CGT event, the partnership:

(i) owned the investment; and

(ii) had owned the investment for at least 12 months; and

(iii) was an Australian venture capital fund of funds that was unconditionally registered; and

(iv) in the case of a capital gain - met all of the *registration requirements of an AFOF that are not *investment registration requirements.

Note:

The registration requirements of an AFOF are set out in section 9-5 of the Venture Capital Act 2002 . It is important to understand that this is a separate requirement from registration under Part 2 of that Act (which effectively determines whether an entity is an AFOF).

It is technically possible to be registered under Part 2 of that Act without meeting the registration requirements of an AFOF, but you might still not be entitled to exemption under this section.

Meaning of Australian venture capital fund of funds

118-410(3)    

A *limited partnership is an Australian venture capital fund of funds at a particular time if, at that time, the partnership ' s registration as an Australian venture capital fund of funds under Part 2 of the Venture Capital Act 2002 is, or is taken to have been, in force.

For when the registration is, or is taken to have been, in force, see section 13-10 of the Venture Capital Act 2002 .

Note:

In this Act and the Venture Capital Act 2002 , the term " Australian venture capital fund of funds " is usually abbreviated to " AFOF " .

Effect of converting convertible notes etc.

118-410(4)    
A partnership that acquired a *share in a company by converting a *convertible note, or a convertible preference share, issued by the company is treated, for the purposes of subparagraphs (1)(f)(ii) and (2)(e)(ii), as having owned the share from the time when it last acquired the convertible note or convertible preference share.

118-410(5)    

A partnership that acquired a unit in a unit trust by converting a *convertible note issued by or on behalf of the trustee of the unit trust is treated, for the purposes of subparagraphs (1)(f)(ii) and (2)(e)(ii), as having owned the unit from the time when it last acquired the convertible note.

118-410(6)    

Subsection (4) or (5) applies whether or not the acquisition of the *convertible note, or convertible preference share, was an *eligible venture capital investment.

118-410(7)    

A partnership that converts a *convertible note into a share or a unit is treated, for the purposes of subparagraphs (1)(f)(ii) and (2)(e)(ii), as continuing to own the convertible note until the partnership no longer owns the share or unit.