Taxation Laws Amendment (Venture Capital) Act 2002 (136 of 2002)

Schedule 3   Capital gains tax treatment of carried interests

Income Tax Assessment Act 1997

5   At the end of Subdivision 104-K

Add:

104-255 Carried interests: CGT event K9

(1) CGT event K9 happens if you become entitled to receive a payment of a *carried interest of a *general partner in a *VCLP or an *AFOF or a *limited partner in a *VCMP.

(2) The time of the event is the time you become entitled to receive the payment.

(3) You make a capital gain equal to the *capital proceeds from the *CGT event.

Note: You cannot make a capital loss.

Meaning of carried interest

(4) The carried interest of a *general partner in a *VCLP or an *AFOF is the partner’s entitlement to a distribution from the VCLP or AFOF, to the extent that the distribution is contingent upon the attainment of profits for the *limited partners in the VCLP or AFOF.

(5) The carried interest of a *limited partner in a *VCMP is the partner’s entitlement to a distribution from the VCMP, to the extent that the distribution is contingent upon the attainment of profits for the *limited partners in the VCLP or AFOF in which the VCMP is a *general partner.

(6) The *carried interest does not include:

(a) any part of the partner’s entitlement to that distribution that is attributable to a fee (by whatever name called) for the management of the *VCLP, *AFOF or *VCMP; or

(b) any part of the partner’s entitlement to that distribution that is attributable to the partner’s *equity interest in the VCLP, AFOF or VCMP.

Meaning of payment of carried interest

(7) Payment , of a *carried interest, includes:

(a) a payment that is attributable to the carried interest; or

(b) the giving of property in satisfaction of the carried interest: see section 103-5; or

(c) the giving of property in satisfaction of an entitlement that is attributable to the carried interest: see section 103-5.