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 152-70   Direct small business participation percentage  

152-70(1)    

An entity holds a direct small business participation percentage at the relevant time in an entity equal to the percentage worked out using this table:

An entity ' s direct small business participation percentage
	In this entity:	Is:
1	A company	This percentage that the entity has because of holding the legal and equitable interests in *shares in the company:
		(a)	the percentage of the voting power in the company; or
		(b)	the percentage of any *dividend that the company may pay; or
		(c)	the percentage of any distribution of capital that the company may make;
		or, if they are different, the smaller or smallest.
2	A trust (where entities have entitlements to all the income and capital of the trust)	This percentage:
		(a)	the percentage of any distribution of income that the trustee may make to which the entity would be beneficially entitled; or
		(b)	the percentage of any distribution of capital that the trustee may make to which the entity would be beneficially entitled;
		or, if they are different, the smaller.
3	A trust (where entities do not have entitlements to all the income and capital of the trust)	This percentage:
		(a)	if the trustee makes distributions of income during the income year (the relevant year ) in which that time occurs - the percentage of the distributions to which the entity was beneficially entitled; or
		(b)	if the trustee makes distributions of capital during the relevant year - the percentage of the distributions to which the entity was beneficially entitled;
		or, if 2 different percentages are applicable, the smaller.

Companies

152-70(2)    

For item 1 of the table, ignore *redeemable shares.

152-70(3)    

Paragraph (a) of item 1 of the table does not apply if the entity holds the legal and equitable interests in the *shares jointly with another entity.

Discretionary trusts

152-70(4)    

Subsections (5) and (6) apply for the purpose of working out the *direct small business participation percentage in an entity in connection with a *CGT event that happened in an income year (the CGT event year ), if:

(a) the entity is a trust (where entities do not have entitlements to all the income and capital of the trust); and

(b) during the relevant year mentioned in item 3 of the table in subsection (1) (disregarding subsection (5)), the trustee mentioned in that item:

(i) does not make a distribution of income; and

(ii) does not make a distribution of capital.

152-70(5)    

Treat the references in that item to the relevant year as being references to:

(a) if the trustee made a distribution of income or capital during the CGT event year - the CGT event year; or

(b) otherwise - the last income year before the CGT event year in which the trustee did make a distribution of income or capital.

152-70(6)    

Despite subsection (5), an entity holds a direct small business participation percentage of 0% in the trust at the relevant time if either:

(a) the trust:

(i) had a *net income for the relevant year; and

(ii) did not have a *tax loss for the relevant year; or

(b) the trustee did not make a distribution of income or capital at any time before the end of the CGT event year.