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 118-405   Exemption for certain foreign venture capital investments through venture capital limited partnerships  

General

118-405(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 investment that the partnership made that is an *eligible venture capital investment; and

(c) when the partnership made the investment, the partnership was a *venture capital limited partnership that was *unconditionally registered; and

(d) 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 a venture capital limited partnership that was unconditionally registered; and

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

Note:

The registration requirements of a VCLP are set out in section 9-1 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 a VCLP).

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

Meaning of venture capital limited partnership

118-405(2)    
A *limited partnership is a venture capital limited partnership at a particular time if, at that time, the partnership ' s registration as a venture capital limited partnership 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 " venture capital limited partnership " is usually abbreviated to " VCLP " .

Effect of converting convertible notes etc.

118-405(3)    
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 subparagraph (1)(d)(ii), as having owned the share from the time when it last acquired the convertible note or convertible preference share.

118-405(4)    

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 subparagraph (1)(d)(ii), as having owned the unit from the time when it last acquired the convertible note.

118-405(5)    

Subsection (3) or (4) applies whether or not the acquisition of the *convertible note, or convertible preference share, was an *eligible venture capital investment.

118-405(6)    

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