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INCOME TAX ASSESSMENT ACT 1997 - SECT 152.70

Direct small business participation percentage

  (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

  (2)   For item   1 of the table, ignore * redeemable shares.

  (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

  (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.

  (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.

  (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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