Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-3 - CAPITAL GAINS AND LOSSES: SPECIAL TOPICS  

Division 152 - Small business relief  

Subdivision 152-A - Basic conditions for relief under this Division  

Small business participation percentage

SECTION 152-75   Indirect small business participation percentage  

152-75(1)    
Work out the indirect small business participation percentage that an entity (the holding entity ) holds at a particular time in another entity (the test entity ) by multiplying:

(a) the holding entity ' s *direct small business participation percentage (if any) in another entity (the intermediate entity ) at that time; by

(b) the sum of:

(i) the intermediate entity ' s direct small business participation percentage (if any) in the test entity at that time; and

(ii) the intermediate entity's indirect small business participation percentage (if any) in the test entity at that time (as worked out under one or more other applications of this section).

Note:

When testing an intermediate entity ' s indirect small business participation percentage in another entity, the intermediate entity becomes the holding entity.

152-75(2)    
If there is more than one intermediate entity to which paragraph (1)(a) applies at that time, the holding entity ' s indirect small business participation percentage is the sum of the percentages worked out under subsection (1) in relation to each of those intermediate entities.

Example:

The individual mentioned in the diagram has an indirect small business participation percentage in the unit trust.

Multiplying the percentages as mentioned in subsection (1) produces small business participation percentage of 43.2%.

If the individual had a direct small business participation percentage of 10% in the unit trust, that would be added to the individual's indirect small business participation percentage to produce a small business participation percentage in the trust of 53.2%.