Taxation Laws Amendment (Venture Capital) Act 2002 (136 of 2002)
Schedule 2 Flow-through treatment, and related matters
Income Tax Assessment Act 1936
13 After subsection 92(2)
(2AA) However, if:
(a) the partner is a limited partner in a partnership; and
(b) the partnership is a VCLP, an AFOF or a VCMP during the year of income;
the amount allowable under subsection (2), in respect of the year of income, as a deduction must not exceed the amount worked out as follows:
Step 1. Work out the sum of the amounts that the partner has contributed (the partners contribution ) to the partnership.
Step 2. Subtract the sum of all the amounts (if any) of the partners contribution that are repaid to the partner.
Step 3. Subtract the sum of all deductions allowed to the partner for losses of the partnership in previous years of income.
Step 4. Subtract the sum of the amounts of all the debt interests issued by the partner to the extent that they are secured by the partners interest in the partnership.
Example: A limited partner contributes $100,000 to a VCLP, having borrowed $80,000. Because the lender values the partners interest in the partnership at $70,000, the partner also provides, as additional security, other assets valued at $10,000.
If none of the partners contribution has been repaid and the partner has not been allowed deductions for partnership losses in previous years of income, the amount allowable to the partner for a partnership loss cannot exceed $30,000.