Tax Laws Amendment (Tax Incentives for Innovation) Act 2016 (54 of 2016)

Schedule 2   Venture capital investment

Part 5   Requirements for entities in which VCLPs, ESVCLPs and AFOFs invest

Income Tax Assessment Act 1997

32   Subsection 118-427(5)

Repeal the subsection, substitute:

Investment in other entities

(5) The unit trust must not invest, in another entity, any part of the amount invested, unless:

(a) the other entity:

(i) is *connected with the unit trust (but not because the other entity is an *associate of the unit trust as a result of an investment made in the other entity by the partnership); and

(ii) meets the requirements of subsections (4) to (8); or

(b) the other entity:

(i) is, after the investment is made, controlled by the unit trust in a way described in section 328-125; and

(ii) meets the requirements of subsections (3) to (8) of this section (other than subsection (4)).

However, this subsection does not prevent the unit trust from depositing money with an *ADI, or with a body authorised by or under a law of a foreign country to carry on banking business in that country.

Note 1: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made.

Note 2: The other entity can be taken to meet the requirements of subsection (3) if Innovation Australia determines that its activities are complementary to activities of the unit trust or other controlled entities and that the unit trust meets those requirements at the time of the investment: see subsection (15B).

Investment in the capacity of a trustee

(5A) The unit trust must not, in the capacity of a trustee, use any part of the amount invested.

Note: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made.