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

33   After subsection 118-427(15)

Insert:

Activities disregarded in applying the predominant activity test

(15A) If *Innovation Australia determines under section 25-15 of the Venture Capital Act 2002 that:

(a) the activities of the controlled entity of a unit trust are complementary to one or more of the activities, of the unit trust or its other controlled entities, that are not ineligible activities mentioned in subsection (14) of this section; and

(b) the activities that, taken together, constitute the principal activities of the unit trust and all of its controlled entities are not ineligible activities mentioned in subsection (14) of this section; and

(c) in all the circumstances, it is appropriate that, for a period specified in the determination, the activities of the controlled entity are disregarded when applying subsection (4) of this section to the unit trust;

in applying subsection (4) of this section to the unit trust, disregard, for the period specified in the determination, the activities of the controlled entity.

Other entity can be taken to meet requirements relating to location in Australia

(15B) In applying subsection (5) to a unit trust in relation to its investment in another entity, the other entity is taken, for the purposes of subparagraph (5)(b)(ii), to meet the requirements of subsection (3) if *Innovation Australia determines under section 25-15 of the Venture Capital Act 2002 that:

(a) the activities of the other entity are complementary to one or more of the activities of the unit trust or its other controlled entities; and

(b) the unit trust meets the requirements of subsection (3) of this section at the time the investment is made, or will meet those requirements at the time the investment is proposed to be made.