Tax Laws Amendment (2007 Measures No. 2) Act 2007 (78 of 2007)

Schedule 8   Venture capital

Part 2   Early stage venture capital limited partnerships

Income Tax Assessment Act 1997

105   After section 51-50

Insert:

51-52 Income derived from eligible venture capital investments by ESVCLPs

General

(1) An entity’s share of income derived from an *eligible venture capital investment is exempt from income tax if:

(a) the entity is a partner in a *limited partnership; and

(b) the partnership made the investment; and

(c) the investment meets all of the *additional investment requirements for ESVCLPs for the investment; and

(d) when the partnership made the investment, the partnership was an *early stage venture capital limited partnership that was *unconditionally registered; and

(e) when the income was derived, the partnership:

(i) owned the investment; and

(ii) was an early stage venture capital limited partnership that was unconditionally registered.

Partners in AFOFs

(2) An entity’s share of income derived from an *eligible venture capital investment is exempt from income tax if:

(a) the entity is a partner in an *AFOF; and

(b) the AFOF is a partner in a partnership that made the investment; and

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

(d) the investment meets all of the *additional investment requirements for ESVCLPs for the investment; and

(e) when the income was derived, the partnership:

(i) owned the investment; and

(ii) was an early stage venture capital limited partnership that was unconditionally registered.

Residency requirements for general partners

(3) However, if the entity is a *general partner in the partnership, this section does not apply to the entity unless the entity is:

(a) an Australian resident; or

(b) a resident of a foreign country in respect of which a double tax agreement (as defined in Part X of the Income Tax Assessment Act 1936) is in force that is an agreement of a kind referred to in subparagraph (b)(i), (ia), (ii), (iii), (iv) or (v) of that definition.

(4) For the purposes of this section, the place of residence of a *general partner in a *limited partnership:

(a) that is a company or limited partnership; and

(b) that is not an Australian resident;

is the place in which the general partner has its central management and control.

Beneficiaries’ shares of capital gains made by unit trusts

(5) For the purposes of this section, an entity’s share of income derived from an *eligible venture capital investment that is an investment in a unit trust includes any present entitlement of the entity, as a beneficiary, to a share of an amount included in the assessable income of the unit trust under section 102-5.

Carried interests

(6) This section does not apply to an entity’s share of income derived from an *eligible venture capital investment to the extent that the income is a payment of a *carried interest of a *general partner in an *ESVCLP or an *AFOF.