Tax Laws Amendment (Tax Incentives for Innovation) Act 2016 (54 of 2016)
Schedule 2 Venture capital investment
Part 1 Tax offset for ESVCLP investments
Income Tax Assessment Act 1997
2 At the end of Division 61
Add:
Subdivision 61-P - ESVCLP tax offset
Guide to Subdivision 61-P
61-750 What this Subdivision is about
A limited partner in an ESVCLP may be entitled to a tax offset for investing in the ESVCLP.
Table of sections
Operative provisions
61-755 Object of this Subdivision
61-760 Who is entitled to the ESVCLP tax offset
61-765 Amount of the ESVCLP tax offset - general case
61-770 Amount of the ESVCLP tax offset - members of trusts or partnerships
61-775 Amount of the ESVCLP tax offset - trustees
Operative provisions
61-755 Object of this Subdivision
The object of this Subdivision is to encourage new investment in early stage venture capital by providing investors with a *tax offset to reduce the effective cost of such investments.
61-760 Who is entitled to the ESVCLP tax offset
General case
(1) A *limited partner of an *ESVCLP is entitled to a *tax offset for an income year if:
(a) the partner contributes to the ESVCLP during the income year; and
(b) the partner is not a trust or partnership.
Members of trusts or partnerships
(2) A *member of a trust or partnership is entitled to a *tax offset for an income year if the trust or partnership would be entitled to a tax offset, under this section, for the income year if it were an individual.
Trustees
(3) A trustee of a trust is entitled to a *tax offset for an income year if:
(a) the trust would be entitled to a tax offset, under this section, for the income year if it were an individual; and
(b) in a case where the trustee has determined percentages under subsection 61-770(2) in relation to the *members of the trust - the sum of those percentages is not 100%; and
(c) the trustee is liable to be assessed or has been assessed, and is liable to pay *tax, on a share of, or all or a part of, the trust's *net income under section 98, 99 or 99A of the Income Tax Assessment Act 1936 for that income year.
61-765 Amount of the ESVCLP tax offset - general case
(1) If subsection 61-760(1) applies, the amount of the *tax offset for the income year is 10% of the lesser of:
(a) the sum of the amounts the partner contributes to the *ESVCLP during the income year, reduced by any amounts excluded under subsection (2); and
(b) the amount (the investment related amount ) worked out under subsection (3).
(2) The following amounts are excluded for the purposes of paragraph (1)(a) in relation to the income year:
(a) any parts of a contribution the partner made to the *ESVCLP that the ESVCLP is, or will become, obliged to repay to the partner, whether or not:
(i) the obligation arises during the income year; or
(ii) the obligation arises only when the partner requests repayment;
(b) any parts of a contribution the partner made to the ESVCLP that, during the income year, are repaid to the partner within 12 months after the contribution was made;
(c) any parts of a contribution the partner made to the ESVCLP to the extent that they comprise a commitment to provide money or property in the future.
(3) Work out the investment related amount as follows:
where:
partner's share is the partner's share of the capital of the *ESVCLP at the end of the income year, expressed as a percentage of the entire capital of the ESVCLP.
sum of eligible venture capital investments is the sum of:
(a) all the amounts of the *eligible venture capital investments made by the *ESVCLP during the period starting at the start of the income year and ending 2 months after the end of the income year; and
(b) all the incidental costs, incurred during that period, of making those investments; and
(c) all the administrative expenses, incurred during that period, associated with those investments.
(4) For the purposes of paragraph (a) of the definition of sum of eligible venture capital investments in subsection (3), disregard the amounts of any *eligible venture capital investments that were taken into account in working out the amount of a *tax offset under this Subdivision for a preceding income year.
61-770 Amount of the ESVCLP tax offset - members of trusts or partnerships
(1) If subsection 61-760(2) applies, the amount of the *member's *tax offset for the income year is as follows:
where:
determined share of notional tax offset is the percentage determined under subsection (2) for the *member.
notional tax offset amount is what would, under section 61-765, have been the amount of the trust's or partnership's *tax offset (the notional tax offset ) if the trust or partnership had been an individual.
(2) The trustee or partnership may determine the percentage of the notional tax offset that is the *member's share of the notional tax offset.
(3) If, under the terms and conditions under which the trust or partnership operates, the *member would be entitled to a fixed proportion of any *capital gain from a *disposal, were the disposal to happen in relation to trust or partnership, of investments made as a result of contributions that gave rise to the notional tax offset:
(a) the percentage determined under subsection (2) must be equivalent to that fixed proportion at the end of the income year to which the notional tax offset relates; and
(b) a determination of any other percentage has no effect.
(4) The trustee or partnership must give the *member written notice of the determination. The notice:
(a) must enable the member to work out the amount of the member's *tax offset by including enough information to enable the member to work out the member's share of the notional tax offset; and
(b) must be given to the member within 3 months after the end of the income year, or within such further time as the Commissioner allows.
(5) The sum of all the percentages determined under subsection (2) in relation to the *members of the trust or partnership must not exceed 100%.
61-775 Amount of the ESVCLP tax offset - trustees
If subsection 61-760(3) applies, the amount of the *tax offset for the income year is the difference between:
(a) what would, under section 61-765, have been the amount of the tax offset to which the trust would have been entitled if it had been an individual; and
(b) if *members of the trust are entitled to tax offsets under subsection 61-760(2) arising from the same contributions from which the trustee's entitlement arises under subsection 61-760(3) - the sum of the amounts, under section 61-770, of those tax offsets.