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.


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