Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT (VENTURE CAPITAL) ACT 2002 NO. 136, 2002 - SCHEDULE 3

Fringe Benefits Tax Assessment Act 1986

1 Subsection 136(1) (after paragraph (m) of the definition of fringe benefit)

Insert:

(ma)

a payment, within the meaning of subsection 104- 255(7) of the Income Tax Assessment Act 1997 , of a carried interest of a kind referred to in subsection 104-255(1) of that Act; or

(mb)

a grant or acquisition of such a carried interest, or of an entitlement to such a payment; or

Income Tax Assessment Act 1997

2 Section 10-5 (after table item headed "car expenses")

Insert:

3 Section 12-5 (after table item headed "car expenses of employee")

Insert:

4 Section 104-5 (after table row relating to event number K8)

Insert:

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.

6 Section 110-10 (after table row relating to event number K7)

Insert:

7 At the end of section 115-20

Add:

(3)

This section does not apply to a ^* capital gain worked out under subsection 104-255(3) (about carried interests).

8 After subsection 115-25(2)

Insert:

(2A)

If the ^* capital gain results from a ^* CGT event K9 happening:

(a)

subsection (1) does not apply; and

(b)

to be a ^* discount capital gain, the ^* carried interest to which the CGT event relates must arise under a partnership agreement entered into at least 12 months before the CGT event.

9 Subsection 116-20(2)

Omit "and H2", substitute ", H2 and K9".

10 Subsection 116-20(2) (after table row relating to event number H2)

Insert:

11 Section 116-25 (at the end of the table)

Add:

12 At the end of section 116-30

Add:

Carried interests

(5)

This section does not apply to ^* CGT event A1 or C2 to the extent that the CGT event is constituted by ceasing to own:

(a)

the ^* carried interest of a ^* general partner in a ^* VCLP or an ^* AFOF or a ^* limited partner in a ^* VCMP; or

(b)

an entitlement to receive a payment of such a carried interest.

13 After section 118-20

Insert:

118-21 Carried interests

CGT events relating to carried interests not to be treated as income

(1)

The modifications in subsections (2) and (3) apply if ^* CGT event K9 happens in relation to your entitlement to receive a payment of the ^* carried interest of a ^* general partner in a ^* VCLP or an ^* AFOF or a ^* limited partner in a ^* VCMP.

(2)

These provisions do not apply to the CGT event:

(a)

sections 6-5 (about ^* ordinary income), 8-1 (about amounts you can deduct), 15-15 and 25-40 (about profit-making undertakings or plans) and 118-20 (reducing capital gains if amount otherwise assessable);

(b)

sections 25A and 52 of the Income Tax Assessment Act 1936 (about profit-making undertakings or schemes).

(3)

Section 6-10 (about ^* statutory income) does not apply to the ^* CGT event except so far as that section applies in relation to section 102-5 (about net capital gains).

14 Section 136-15 (heading)

Repeal the heading, substitute:

136-15 Making a capital gain or loss from CGT events D1, E9 and K9
15 At the end of section 136-15

Add:

(3)

You make a ^* capital gain from ^* CGT event K9 (about carried interests) only if one of the items in this table is satisfied.

16 Subsection 995-1(1)

Insert: