Income Tax Assessment Act 1997
CHAPTER 3
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SPECIALIST LIABILITY RULES
PART 3-1
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CAPITAL GAINS AND LOSSES: GENERAL TOPICS
Division 118
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Exemptions
Subdivision 118-F
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Venture capital investment
Operative provisions
SECTION 118-420 Meaning of eligible venture capital partner etc. 118-420(1)
A partner in a *limited partnership is an eligible venture capital partner if:
(a) the partner is a *tax-exempt foreign resident; or
(b) the partner is a *foreign venture capital fund of funds, and the sum of:
(ba) the partner is a *widely held foreign venture capital fund of funds; or
(c) the partner is a foreign resident who is not a *general partner of a *VCLP or an *ESVCLP and is neither a *tax-exempt foreign resident nor a *foreign venture capital fund of funds, and the sum of:
118-420(2)
An entity that is an *associate of the partner only because the entity is a partner in the partnership in question is taken not to be a *connected entity of the partner for the purposes of subparagraphs (1)(b)(ii) and (c)(ii).
118-420(3)
An entity is a tax-exempt foreign resident if:
(a) the entity is a foreign resident; and
(b) the entity is not a *general partner of a *VCLP or an *ESVCLP; and
(c) the entity ' s income is exempt, or effectively exempt, from taxation in the entity ' s country of residence.
118-420(4)
An entity that is a *limited partnership is a foreign venture capital fund of funds if:
(a) the partnership was established in a foreign country; and
(b) every partner who is a *general partner is a foreign resident; and
(c) the partnership is not a general partner of a *VCLP or an *ESVCLP.
118-420(5)
An entity that is not a *limited partnership is a foreign venture capital fund of funds if:
(a) whether by operation of law or by election, the entity is not taxed as an entity in its country of residence, but the entity ' s income is taxed to its members according to their interests in the entity; and
(b) the entity was established in a foreign country; and
(c) the entity is a foreign resident; and
(d) the entity is not a *general partner of a *VCLP or an *ESVCLP.
118-420(6)
An entity is a widely held foreign venture capital fund of funds if:
(a) the entity is a *foreign venture capital fund of funds; and
(b) the entity is a *widely held entity; and
(c) *eligible venture capital partners (other than foreign venture capital fund of funds) ultimately hold the rights to at least 90% of the entity ' s income; and
(d) each other entity who:
118-420(7)
A trust is not an eligible venture capital partner if an Australian resident:
(a) is or is likely to become presently entitled, for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 , to; or
(b) has or is likely to have an individual interest, for the purposes of Division 5 of Part III of the Income Tax Assessment Act 1936 , in;
118-420(8)
For the purposes of this section, the place of residence of a *general partner of a *limited partnership:
(a) that is a company or a limited partnership; and
(b) that is a foreign resident;
118-420(9)
For the purposes of this section, the place of residence of an entity referred to in paragraph (5)(a) is the place in which the entity has its central management and control.
View history note
Hide history noteSECTION 118-420 Meaning of eligible venture capital partner etc. 118-420(1)
A partner in a *limited partnership is an eligible venture capital partner if:
(a) the partner is a *tax-exempt foreign resident; or
(b) the partner is a *foreign venture capital fund of funds, and the sum of:
(i) the partner ' s *committed capital in the partnership; and
does not exceed 30% of the partnership ' s committed capital; or
(ii) the sum of the amounts of committed capital in the partnership of any entities that are *connected entities of the partner;
(ba) the partner is a *widely held foreign venture capital fund of funds; or
(c) the partner is a foreign resident who is not a *general partner of a *VCLP or an *ESVCLP and is neither a *tax-exempt foreign resident nor a *foreign venture capital fund of funds, and the sum of:
(i) the partner ' s committed capital in the partnership; and
is less than 10% of the partnership ' s committed capital.
(ii) the sum of the amounts of committed capital in the partnership of any entities that are connected entities of the partner;
Note:
Subsection (7) prevents some trusts from being eligible venture capital partners.
118-420(2)
An entity that is an *associate of the partner only because the entity is a partner in the partnership in question is taken not to be a *connected entity of the partner for the purposes of subparagraphs (1)(b)(ii) and (c)(ii).
118-420(3)
An entity is a tax-exempt foreign resident if:
(a) the entity is a foreign resident; and
(b) the entity is not a *general partner of a *VCLP or an *ESVCLP; and
(c) the entity ' s income is exempt, or effectively exempt, from taxation in the entity ' s country of residence.
118-420(4)
An entity that is a *limited partnership is a foreign venture capital fund of funds if:
(a) the partnership was established in a foreign country; and
(b) every partner who is a *general partner is a foreign resident; and
(c) the partnership is not a general partner of a *VCLP or an *ESVCLP.
118-420(5)
An entity that is not a *limited partnership is a foreign venture capital fund of funds if:
(a) whether by operation of law or by election, the entity is not taxed as an entity in its country of residence, but the entity ' s income is taxed to its members according to their interests in the entity; and
(b) the entity was established in a foreign country; and
(c) the entity is a foreign resident; and
(d) the entity is not a *general partner of a *VCLP or an *ESVCLP.
118-420(6)
An entity is a widely held foreign venture capital fund of funds if:
(a) the entity is a *foreign venture capital fund of funds; and
(b) the entity is a *widely held entity; and
(c) *eligible venture capital partners (other than foreign venture capital fund of funds) ultimately hold the rights to at least 90% of the entity ' s income; and
(d) each other entity who:
(i) if the entity is a *limited partnership - is a *general partner of the partnership; or
is a *foreign resident.
(ii) otherwise - exercises day to day control of the entity;
118-420(7)
A trust is not an eligible venture capital partner if an Australian resident:
(a) is or is likely to become presently entitled, for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 , to; or
(b) has or is likely to have an individual interest, for the purposes of Division 5 of Part III of the Income Tax Assessment Act 1936 , in;
a share of income of the trust, either directly or indirectly through one or more interposed partnerships or trusts.
118-420(8)
For the purposes of this section, the place of residence of a *general partner of a *limited partnership:
(a) that is a company or a limited partnership; and
(b) that is a foreign resident;
is the place in which the general partner has its central management and control.
118-420(9)
For the purposes of this section, the place of residence of an entity referred to in paragraph (5)(a) is the place in which the entity has its central management and control.
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