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INCOME TAX ASSESSMENT ACT 1997 - SECT 118.408 Partial exemption for some capital gains otherwise fully exempt under section 118 - 407

INCOME TAX ASSESSMENT ACT 1997 - SECT 118.408

Partial exemption for some capital gains otherwise fully exempt under section 118 - 407

  (1)   Despite section   118 - 407, you get only a partial exemption for a * capital gain from a * CGT event relating to an * eligible venture capital investment if:

  (a)   apart from this section, all of your share in the capital gain from the CGT event relating to the investment would be disregarded under section   118 - 407; and

  (b)   at the end of an income year to which subsection   (4) applies (a valuation year ), the sum of the values of:

  (i)   the assets of the company or unit trust in which the investment is made; and

  (ii)   the assets of each other entity that is a * connected entity of the company or unit trust;

    exceeds $250 million; and

  (c)   the CGT event happens after:

  (i)   if there is only one valuation year--the end of the period of 6 months after the end of that valuation year; or

  (ii)   if there is more than one valuation year--the end of the period of 6 months after the end of the earliest of those valuation years.

  (2)   If subsection   (1) applies, work out your * capital gain using the formula:

Start formula Normal capital gain minus Valuation year capital gain end formula

where:

"normal capital gain" is what your * capital gain from the * CGT event would be apart from section   118 - 407 and this section.

"valuation year capital gain" is the capital gain you would have made in relation to the * CGT event if the CGT event had happened:

  (a)   if there is only one valuation year--at the end of the period of 6 months after the end of that valuation year; or

  (b)   if there is more than one valuation year--at the end of the period of 6 months after the end of the earliest of those valuation years.

Work out the capital gain based on what the * capital proceeds would have been, and on other matters relating to the amount of the gain being determined on a reasonable basis, if the CGT event resulting in the gain had happened at the end of that period.

  (3)   Despite subsection   (2), you are taken not to have a * capital gain, or a * capital loss, from the * CGT event if the amount worked out under the formula in that subsection would be less than zero.

  (4)   This subsection applies to any income year that:

  (a)   precedes the income year in which the * CGT event happens; but

  (b)   does not precede the income year in which the investment was made.

Note:   There must always be at least one valuation year, because paragraph   118 - 407(1)(d) ensures the CGT event will not happen in the year the investment was made.

  (5)   Section   118 - 407 does not apply in relation to a * CGT event if this section applies in relation to the CGT event.

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