Commonwealth: Tax Laws Amendment (2007 Measures No. 2) Act 2007 (Cth)

Tax Laws Amendment (2007 Measures No. 2) Act 2007 No. 78, 2007 An Act to amend the law relating to taxation, and for related purposes Contents 1 Short title 2 Commencement 3 Schedule(s) 4 Amendment of assessments Schedule 1—Effective life provisions Income Tax Assessment Act 1997 Schedule 2—Taxation of boating activities Part 1—Main amendments Income Tax Assessment Act 1997 Part 2—Consequential amendments A New Tax System (Goods and Services Tax) Act 1999 Income Tax Assessment Act 1997 Part 3—Application Schedule 3—Research and development Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Schedule 4—Donation of listed shares to deductible gift recipients Income Tax Assessment Act 1997 Schedule 5—Specifically listed deductible gift recipients Income Tax Assessment Act 1997 Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 Schedule 6—Deductions for contributions relating to fund‑raising events Income Tax Assessment Act 1997 Schedule 7—Technical corrections Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 8—Venture capital Part 1—Venture capital limited partnerships Income Tax Assessment Act 1997 Venture Capital Act 2002 Part 2—Early stage venture capital limited partnerships Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Pooled Development Funds Act 1992 Venture Capital Act 2002 Part 3—The Venture Capital Registration Board Income Tax Assessment Act 1997 Pooled Development Funds Act 1992 Venture Capital Act 2002 Part 4—Pooled development funds Pooled Development Funds Act 1992 Part 5—Conditional registration Income Tax Assessment Act 1997 Venture Capital Act 2002 Tax Laws Amendment (2007 Measures No. 2) Act 2007 No. 78, 2007 An Act to amend the law relating to taxation, and for related purposes [Assented to 21 June 2007] The Parliament of Australia enacts: 1 Short title This Act may be cited as the Tax Laws Amendment (2007 Measures No. 2) Act 2007. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 4 and anything in this Act not elsewhere covered by this table The day on which this Act receives the Royal Assent. 21 June 2007 2. Schedules 1 to 6 The day on which this Act receives the Royal Assent. 21 June 2007 3. Schedule 7, item 1 The day on which this Act receives the Royal Assent. 21 June 2007 4. Schedule 7, items 2 to 14 1 July 2005. 1 July 2005 5. Schedule 7, items 15 and 16 The day on which this Act receives the Royal Assent. 21 June 2007 6. Schedule 8, Parts 1 to 4 The day on which this Act receives the Royal Assent. 21 June 2007 7. Schedule 8, Part 5 Immediately after the commencement of the Venture Capital Act 2002. 19 December 2002 Note: This table relates only to the provisions of this Act as originally passed by both Houses of the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent. (2) Column 3 of the table contains additional information that is not part of this Act. Information in this column may be added to or edited in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. 4 Amendment of assessments Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment if: (a) the assessment was made before the commencement of this section; and (b) the amendment is made within 4 years after that commencement; and (c) the amendment is made for the purpose of giving effect to Schedule 1. Schedule 1—Effective life provisions Income Tax Assessment Act 1997 1 Subsection 40‑95(7) (table items 11, 12 and 13) Repeal the items. 2 Subsection 40‑95(8) After "*IRU", insert "or a *mining, quarrying or prospecting right". 3 At the end of section 40‑95 Add: Exception: mining, quarrying or prospecting rights (10) The effective life of a *mining, quarrying or prospecting right is the period you work out yourself by estimating the period (in years, including fractions of years) set out in column 3 of this table: Item For this asset: Estimate the period until the end of: 1 A *mining, quarrying or prospecting right relating to *mining operations (except obtaining *petroleum or quarry materials) The life of the mine or proposed mine to which the right relates or, if there is more than one, the life of the mine that has the longest estimated life 2 A *mining, quarrying or prospecting right relating to *mining operations to obtain *petroleum The life of the petroleum field or proposed petroleum field to which the right relates 3 A *mining, quarrying or prospecting right relating to *mining operations to obtain quarry materials The life of the quarry or proposed quarry to which the right relates or, if there is more than one, the life of the quarry that has the longest estimated life (11) You work out the period in subsection (10): (a) as from the *start time of the *mining, quarrying or prospecting right; and (b) by reference only to the period of time over which the reserves, reasonably estimated using an appropriate accepted industry practice, are expected to be extracted from the mine, petroleum field or quarry. 4 Subsection 40‑105(4) Repeal the subsection, substitute: (4) This section does not apply to the following intangible *depreciating assets: (a) assets to which an item in the table in subsection 40‑95(7) applies; (b) *mining, quarrying or prospecting rights. 5 After subsection 40‑110(3) Insert: (3A) Subsections (1), (2) and (3) do not apply to a *depreciating asset that is a *mining, quarrying or prospecting right. (3B) You may choose to recalculate the *effective life of a *mining, quarrying or prospecting right from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to an existing or proposed mine, petroleum field or quarry to which that right relates. 6 Subsection 40‑110(4) Repeal the subsection, substitute: (4) A recalculation under this section must be done using: (a) if paragraph (b) does not apply—section 40‑105 (about self‑assessing effective life); or (b) if the *depreciating asset is a *mining, quarrying or prospecting right—subsections 40‑95(10) and (11). 7 Application The amendments made by this Schedule apply to assessments for the income year in which 1 July 2001 occurred and later income years. Schedule 2—Taxation of boating activities Part 1—Main amendments Income Tax Assessment Act 1997 1 After section 26‑45 Insert: 26‑47 Non‑business boating activities Object (1) The object of this section is to improve the integrity of the taxation system by preventing deductions from boating activities that are not carried on as a *business being offset against other assessable income. Rule (2) This Act applies to you as if so much of the amounts relating to using or *holding boats that you could otherwise deduct for an income year as exceeds your assessable income from using or holding boats for that year: (a) were not deductible for that income year; and (b) were an amount (a quarantined amount) relating to using or holding boats that you can deduct for the next income year. Note: A quarantined amount may be reduced under subsection (5) (for boat capital gains), reduced under subsection (7) (where you deduct part of a quarantined amount under subsection (6) for boat business profits), reduced under subsection (8) (about exempt income) or affected by subsection (10) (about bankruptcy). Example: Ian does not use his boat in a business. In Year 1, Ian would be able to claim $100,000 in deductions for the boat (but for this subsection), including interest, depreciation and running costs. He earns only $40,000 of income from the boat. He can only deduct $40,000. He carries the remaining $60,000 forward to Year 2 (the quarantined amount). In Year 2, Ian has $95,000 of expenses and $30,000 of income for the boat. He can deduct $30,000. The quarantined amount is now $125,000: the quarantined amount from Year 1 plus the excess of expenses over income from Year 2. In Year 3, Ian has $60,000 of expenses and $150,000 of income from the boat. The expenses from Year 3 plus the quarantined amount is $185,000. Therefore, Ian claims a deduction of $150,000 and carries forward $35,000 to Year 4. Exception: business use (3) The rule in subsection (2) does not apply to amounts that are attributable to one or more of the following: (a) *holding a boat as your *trading stock; (b) using a boat (or holding it) mainly for letting it on hire in the ordinary course of a *business that you *carry on; (c) using a boat (or holding it) mainly for transporting the public or goods for payment in the ordinary course of a business that you carry on; (d) using a boat for a purpose that is essential to the efficient conduct of a business that you carry on. Note: Even if this exception applies to you, you may still have to quarantine losses under Division 35 (deferral of losses from non‑commercial business activities). Exception: fringe benefits (4) The rule in subsection (2) does not apply to so much of an amount you incur in *providing a *fringe benefit. Modification if you have boat capital gains (5) You reduce a quarantined amount you have for an income year by so much of that amount as is applied under section 118‑80 to reduce a *capital gain you have for the year in relation to a boat. You make this reduction before you deduct an amount under subsection (6). Deduction if you have boat business profits (6) You can deduct all or part of your remaining quarantined amount for an income year if your assessable income for the year from activities of a kind referred to in subsection (3) exceeds your deductions for the year relating to those activities. The amount you can deduct is the lesser of that excess and that remaining quarantined amount. (7) You reduce your quarantined amount for the year by the amount you deduct. You make this reduction before a reduction under subsection (8). Modification if you have exempt income (8) You reduce any remaining quarantined amount you have for an income year by so much of your *net exempt income as is not applied for that income year under section 35‑15 (about non‑commercial business activities) or section 36‑10 or 36‑15 (about tax losses). Modification if you become bankrupt (9) The modification in subsection (10) has effect if: (a) in an income year (the current year) you become bankrupt or are released from a debt by the operation of an Act relating to bankruptcy; or (b) you became bankrupt before the current year and: (i) the bankruptcy is annulled in the current year under section 74 of the Bankruptcy Act 1966 because your creditors have accepted a proposal for a composition or scheme of arrangement; and (ii) under the composition or scheme of arrangement, you have been, will be or may be released from some or all of the debts from which you would have been released if you had instead been discharged from the bankruptcy. (10) This Act applies to you as if any amount that: (a) is a quarantined amount for you for the current year or was a quarantined amount for you for an earlier year; and (b) has not been applied under section 118‑80 and that you have not yet deducted; were not an amount relating to using or holding boats that you can deduct for the current year or a later year. 2 At the end of section 110‑38 Add: (5) Expenditure does not form part of any element of the cost base to the extent that section 26‑47 prevents it being deducted. Note: Section 26‑47 denies deductions for the excess of boat expenditure over boat income. 3 After subsection 110‑55(9D) Insert: (9E) Expenditure does not form part of the reduced cost base to the extent that section 26‑47 prevents it being deducted. Note: Section 26‑47 denies deductions for the excess of boat expenditure over boat income. 4 At the end of Subdivision 118‑A Add: Boat capital gains 118‑80 Reduction of boat capital gain A *capital gain you make from a *CGT event happening in relation to a boat for an income year is reduced by an amount that is a quarantined amount for you for the income year under subsection 26‑47(2). Note: Section 26‑47 denies deductions for the excess of boat expenditure over boat income. Part 2—Consequential amendments A New Tax System (Goods and Services Tax) Act 1999 5 Paragraph 69‑5(3)(e) Omit "or boat". Income Tax Assessment Act 1997 6 Section 12‑5 (table item relating to boats) Repeal the item, substitute: boats deferral of deductions ....................... 26‑47 7 Section 26‑50 (heading) Repeal the heading, substitute: 26‑50 Expenses for a leisure facility 8 Paragraph 26‑50(1)(a) Omit "or boat". 9 Paragraphs 26‑50(1)(b) to (g) Omit "*leisure facility or boat", substitute "leisure facility". 10 Subsection 26‑50(1) Omit ", (5), (6)". 11 Subsections 26‑50(5) and (6) Repeal the subsections. 12 Subsection 26‑50(7) Omit "or boat" (first occurring). 13 Subsection 26‑50(7) Omit "or (5)". 14 Paragraph 26‑50(7)(a) Omit "or boat". 15 Subsection 40‑25(3) (heading) Repeal the heading, substitute: Further reduction: leisure facilities 16 Subsection 40‑25(3) Omit "or a boat". 17 Subsection 40‑25(4) Repeal the subsection, substitute: (4) That reduction is the part of the *leisure facility's decline in value that is attributable to your use of it, or your having it *installed ready for use, at a time when: (a) its use did not constitute a *fringe benefit; or (b) you did not use it or *hold it for use as mentioned in paragraph 26‑50(3)(b) (about using it in the course of your business or for your employees). Part 3—Application 18 Application The amendments made by this Schedule apply to the first income year starting on or after the day on which this Act receives the Royal Assent and later income years. Schedule 3—Research and development Income Tax Assessment Act 1936 1 Subsections 73H(1) and (2) Omit "72L", substitute "73L". 2 Subsection 73I(2) Repeal the subsection, substitute: (2) The choice must be made: (a) in the company's return of income for the tax offset year; or (b) by notice in writing given to the Commissioner: (i) for a year of income starting before the commencement of this subsection—before the end of the period that the Commissioner could amend an assessment for the company assuming such an assessment were made at that commencement; or (ii) otherwise—before the end of the period that the Commissioner could amend an assessment for the company for the tax offset year. 3 After section 73I Insert: 73IA Objections (1) The Commissioner may give an eligible company a written notice specifying the amount of a tax offset allowable to the company under section 73I. The notice must specify that it was issued under this subsection and may contain such other information as the Commissioner thinks fit. (2) If an eligible company is dissatisfied with the notice, the company may object in the manner set out in Part IVC of the Taxation Administration Act 1953. 4 Application The amendment made by item 3 applies to years of income commencing on or after 1 July 2001. 5 Paragraph 73J(1)(b) Repeal the paragraph, substitute: (b) either: (i) all or part of the amount that the company could, apart from subsection 73I(4), have deducted is contracted expenditure; or (ii) its aggregate research and development amount for the tax offset year exceeds $20,000; and 6 Application The amendment made by item 5 applies to expenditure incurred in years of income commencing on or after the day on which this Act receives the Royal Assent. 7 Paragraph 73J(1)(c) Omit "taxpayers", substitute "persons". 8 Subsection 73J(1) (note) Omit "taxpayers", substitute "persons". 9 Application The amendment made by item 7 applies to the first year of income commencing after 9 May 2006 and later years. 10 Subsection 73P(2) Insert: commercial ready grant means a subsidy or grant that: (a) is paid to an eligible company under the program known as the Commercial Ready program; and (b) includes a component for activities of the company that are research and development activities, or would be, apart from subsection 73B(2BA); and (c) is for a year of income in relation to which the company is not registered as mentioned in subsection 73B(10). 11 Application The amendment made by item 10 applies to payments received on or after 6 May 2004. 12 Paragraphs 73Q(1)(a) and (b) After "incremental expenditure", insert "incurred during its group membership period". 13 Subsection 73Q(3) After "incremental expenditure", insert "incurred during its group membership period". 14 Application The amendments made by items 12 and 13 apply to assessments for the year of income following the year of income in which this Act receives the Royal Assent and later years. 15 Subsection 73Q(3) After "start grant", insert "or a commercial ready grant". 16 Application The amendment made by item 15 applies to payments received on or after 6 May 2004. 17 Section 73S Omit "or 73V", substitute ", 73V or 73W". 18 Application The amendment made by item 17 applies to years of income commencing on or after 1 July 2001. 19 Subsection 73X(1) Repeal the subsection, substitute: (1) The premium amount is distributed between each group member (the increasing members) that increased its incremental expenditure incurred during its group membership period for the Y0 year of income over the average of its incremental expenditure incurred during its group membership period for the Y‑1, Y‑2 and Y‑3 years of income. 20 Application The amendment made by item 19 applies to assessments for the year of income following the year of income in which this Act receives the Royal Assent and later years. Income Tax Assessment Act 1997 21 Section 12‑5 (at the end of the table item headed "research & development") Add: 175% deduction ........................... 73P to 73Z Taxation Administration Act 1953 22 After paragraph 14ZW(1)(bb) Insert: (bc) if the taxation objection is made under subsection 73IA(2) of the Income Tax Assessment Act 1936: (i) if item 2 or 3 of the table in subsection 170(1) of that Act would apply to an assessment of the person for the tax offset year referred to in section 73I of that Act—2 years after notice of the amount (if any) of a tax offset allowable to the person under section 73I of that Act is given to the person; or (ii) otherwise—4 years after the notice concerned is given to the person; or Schedule 4—Donation of listed shares to deductible gift recipients Income Tax Assessment Act 1997 1 Subsection 30‑15(2) (table item 1, at the end of the column headed "Type of gift or contribution") Add: ; or (e) *shares that you have acquired in a *listed public company if: • the shares are listed for quotation in the official list of a stock exchange that is listed under the heading "Australia" in regulations made for the purposes of the definition of *approved stock exchange; and • the *market value of the shares on the day you made the gift is $5,000 or less; and • you acquire the shares at least 12 months before making the gift. 2 Subsection 30‑15(2) (paragraph (b) in the cell at table item 1, column headed "How much you can deduct") Omit "or property covered by paragraph (d)", substitute ", property covered by paragraph (d) or shares covered by paragraph (e)". 3 Subsection 30‑15(2) (table item 1, at the end of the column headed "How much you can deduct") Add: ; or (e) if the gift is shares described in paragraph (e) of the previous column—the market value of the shares on the day you made the gift. 4 Subsection 30‑15(2) (table item 2, at the end of the column headed "Type of gift or contribution") Add: ; or (e) *shares that you have acquired in a *listed public company if: • the shares are listed for quotation in the official list of a stock exchange that is listed under the heading "Australia" in regulations made for the purposes of the definition of *approved stock exchange; and • the *market value of the shares on the day you made the gift is $5,000 or less; and • you acquire the shares at least 12 months before making the gift. 5 Subsection 30‑15(2) (paragraph (b) in the cell at table item 2, column headed "How much you can deduct") Omit "or property covered by paragraph (d)", substitute ", property covered by paragraph (d) or shares covered by paragraph (e)". 6 Subsection 30‑15(2) (table item 2, at the end of the column headed "How much you can deduct") Add: ; or (e) if the gift is shares described in paragraph (e) of the previous column—the market value of the shares on the day you made the gift. 7 Subsection 30‑15(2) (after paragraph (c) in the cell at table item 7, column headed "Type of gift or contribution") Insert: or (ca) *shares that you have acquired in a *listed public company if: • the shares are listed for quotation in the official list of a stock exchange that is listed under the heading "Australia" in regulations made for the purposes of the definition of *approved stock exchange; and • the market value of the shares on the day you made the contribution is more than $150 and less than or equal to $5,000; and • you acquire the shares at least 12 months before making the contribution; 8 Subsection 30‑15(2) (table item 7, at the end of the column headed "How much you can deduct") Add: ; or (ca) if the contribution is shares described in paragraph (ca) of the previous column—the market value of the shares on the day you made the contribution, reduced by the GST inclusive market value, on the day you made the contribution, of the right to attend, or participate in, the fund‑raising event. 9 Subsection 30‑15(2) (after paragraph (c) in the cell at table item 7, column headed "Special conditions") Insert: (ca) if the contribution is shares described in paragraph (ca) of the column headed "Type of gift or contribution"—the GST inclusive market value, on the day you made the contribution, of the right to attend, or participate in, the fund‑raising event must not exceed the lesser of: • 20% of the market value of the shares on the day you made the contribution; and • $150; and 10 Application The amendments made by this Schedule apply in relation to gifts and contributions made in an income year commencing on or after the day on which this Act receives the Royal Assent. Schedule 5—Specifically listed deductible gift recipients Income Tax Assessment Act 1997 1 Subsection 30‑50(2) (table item 5.2.25) Omit "27 August 2006", substitute "28 August 2007". 2 Section 30‑65 (table item 7.2.4) Omit "Voluntary Service to Indigenous Communities Foundation", substitute "Indigenous Community Volunteers Limited". 3 Subsection 30‑80(2) (at the end of the table) Add: 9.2.18 American Australian Association Limited the gift must be made after 13 November 2006 4 Section 30‑105 (at the end of the table) Add: 13.2.12 Bunbury Diocese Cathedral Rebuilding Fund the gift must be made after 18 December 2006 and before 19 December 2008 5 Subsection 30‑315(2) (after table item 2AC) Insert: 2AD American Australian Association Limited item 9.2.18 6 Subsection 30‑315(2) (after table item 28A) Insert: 28ABA Bunbury Diocese Cathedral Rebuilding Fund item 13.2.12 7 Subsection 30‑315(2) (after table item 60) Insert: 60A Indigenous Community Volunteers Limited item 7.2.4 8 Subsection 30‑315(2) (table item 122A) Repeal the item. Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 9 Item 12 of Schedule 3 Omit ", 5.2.22 and 5.2.25", substitute "and 5.2.22". Schedule 6—Deductions for contributions relating to fund‑raising events Income Tax Assessment Act 1997 1 Subsection 30‑15(2) (paragraphs (a) and (b) of table item 7, column headed "Type of gift or contribution") Omit "$250", substitute "$150". 2 Subsection 30‑15(2) (paragraph (a) of table item 7, column headed "Special conditions") Omit "10%", substitute "20%". 3 Subsection 30‑15(2) (paragraph (a) of table item 7, column headed "Special conditions") Omit "$100", substitute "$150". 4 Subsection 30‑15(2) (paragraph (b) of table item 7, column headed "Special conditions") Omit "10%", substitute "20%". 5 Subsection 30‑15(2) (paragraph (b) of table item 7, column headed "Special conditions") Omit "$100", substitute "$150". 6 Subsection 30‑15(2) (paragraph (c) of table item 7, column headed "Special conditions") Omit "$100", substitute "$150". 7 Subsection 30‑15(2) (paragraph (a) of table item 8, column headed "Type of gift or contribution") Omit "$250", substitute "$150". 8 Subsection 30‑15(2) (paragraph (a) of table item 8, column headed "Special conditions") Omit "10%", substitute "20%". 9 Subsection 30‑15(2) (paragraph (a) of table item 8, column headed "Special conditions") Omit "$100", substitute "$150". 10 Application The amendments made by this Schedule apply, and are taken to have applied, in relation to contributions made on or after 1 January 2007. Schedule 7—Technical corrections Income Tax Assessment Act 1936 1 Paragraph 272‑100(d) in Schedule 2F Omit "persons all of whose income is exempt from tax under section 23, or under Division 50 of the Income Tax Assessment Act 1997,", substitute "exempt entities". Income Tax Assessment Act 1997 2 Paragraph 58‑5(2)(a) Omit "exempt entity", substitute "*exempt entity". 3 Paragraph 58‑5(4)(a) Before "an *exempt entity", insert "the Commonwealth, a State, a Territory or". 4 Paragraph 58‑5(4)(b) Before "the exempt entity", insert "the Commonwealth, the State, the Territory or". 5 Paragraph 58‑5(5)(a) Before "the *exempt entity", insert "the Commonwealth, the State, the Territory or". 6 Subsection 58‑10(1) Before "the *exempt entity", insert "the Commonwealth, the State, the Territory or". 7 Paragraph 58‑10(1)(a) Repeal the paragraph, substitute: (a) the asset was used by the Commonwealth, the State, the Territory or the exempt entity in carrying on a business and the purchaser or another entity uses the asset in carrying on the business; or 8 Paragraph 58‑10(2)(a) Repeal the paragraph, substitute: (a) the asset was used by the Commonwealth, the State, the Territory or the *exempt entity in performing functions, or engaging in activities, that did not constitute the carrying on of a *business by the Commonwealth, the State, the Territory or the exempt entity and the asset is used by the purchaser or another entity in performing those functions or engaging in those activities as part of carrying on a business; or 9 Subparagraph 58‑10(2)(b)(i) Omit "person from the exempt entity or from an *associate of the exempt entity", substitute "entity from the Commonwealth, the State, the Territory or the exempt entity or from an *associate of the Commonwealth, the State, the Territory or the exempt entity". 10 Subparagraphs 58‑10(2)(b)(ii) and (iii) Omit "person" (wherever occurring), substitute "entity". 11 Paragraph 58‑10(2)(c) Omit "person acquired another asset from the exempt entity or from an associate of the exempt entity", substitute "entity acquired another asset from the Commonwealth, the State, the Territory or the exempt entity or from an associate of the Commonwealth, the State, the Territory or the exempt entity". 12 Paragraph 58‑10(2)(c) Before "the exempt entity" (last occurring), insert "the Commonwealth, the State, the Territory or". 13 Paragraph 58‑85(1)(a) Repeal the paragraph, substitute: (a) a balance sheet, as at the end of an annual accounting period (the balance date), that was prepared as part of the final accounts of the Commonwealth, a State, a Territory or an *exempt entity for that period showed the asset as an asset of the relevant entity and specified a value for it; and 14 Subsection 995‑1(1) (definition of exempt entity) Repeal the definition, substitute: exempt entity means: (a) an entity all of whose *ordinary income and *statutory income is exempt from income tax because of this Act or because of another *Commonwealth law, no matter what kind of ordinary income or statutory income the entity might have; or (b) an *untaxable Commonwealth entity. Note: See section 11‑5 for a list of entities of the kind referred to in paragraph (a). 15 Transitional Subsection 73J(2) of the Income Tax Assessment Act 1936 has effect for an eligible company, as if the amendment made by item 14 of this Schedule had not been made, during the period: (a) starting at the start of the year of income of the company in which 1 July 2005 occurred; and (b) ending at the end of the company's year of income in which the day on which this Act receives the Royal Assent occurs. 16 Application: GST For the purposes of subsection 69‑5(4) of the A New Tax System (Goods and Services Tax) Act 1999, the amendment made by item 14 of this Schedule applies to net amounts for tax periods starting on or after the day on which this Act receives the Royal Assent. Schedule 8—Venture capital Part 1—Venture capital limited partnerships Income Tax Assessment Act 1997 1 Section 118‑400 After "companies" (first occurring), insert "and unit trusts". 2 Paragraph 118‑405(1)(c) Repeal the paragraph, substitute: (c) when the partnership made the investment, the partnership was a *venture capital limited partnership that was *unconditionally registered; and 3 Subparagraph 118‑405(1)(d)(iv) Omit "the registration", substitute "the *registration". 4 Subparagraph 118‑405(1)(d)(iv) Omit "investment", substitute "*investment". 5 Subsection 118‑405(3) (heading) Repeal the heading, substitute: Effect of converting convertible notes etc. 6 At the end of section 118‑405 Add: (4) A partnership that acquired a unit in a unit trust by converting a *convertible note issued by or on behalf of the trustee of the unit trust is treated, for the purposes of subparagraph (1)(d)(ii), as having owned the unit from the time when it last acquired the convertible note. (5) Subsection (3) or (4) applies whether or not the acquisition of the *convertible note, or convertible preference share, was an *eligible venture capital investment. (6) A partnership that converts a *convertible note into a share or a unit is treated, for the purposes of subparagraph (1)(d)(ii), as continuing to own the convertible note until the partnership no longer owns the share or unit. 7 Paragraphs 118‑410(1)(c) and (d) Repeal the paragraphs, substitute: (c) when the investment was made, the partnership was an *Australian venture capital fund of funds that was *unconditionally registered; and (d) when the investment was made, the VCLP or ESVCLP was unconditionally registered; and 8 Subparagraph 118‑410(1)(e)(ii) Omit "the registration", substitute "the *registration". 9 Subparagraph 118‑410(1)(e)(ii) Omit "investment", substitute "*investment". 10 Subparagraph 118‑410(1)(f)(iv) Omit "the registration", substitute "the *registration". 11 Paragraph 118‑410(2)(b) After "company", insert ", or a unit trust,". 12 Paragraph 118‑410(2)(c) Repeal the paragraph, substitute: (c) when the investment was made, the partnership was an *Australian venture capital fund of funds that was *unconditionally registered; and 13 Subparagraph 118‑410(2)(e)(iv) Omit "the registration", substitute "the *registration". 14 Subparagraph 118‑410(2)(e)(iv) Omit "investment", substitute "*investment". 15 Subsection 118‑410(4) (heading) Repeal the heading, substitute: Effect of converting convertible notes etc. 16 At the end of section 118‑410 Add: (5) A partnership that acquired a unit in a unit trust by converting a *convertible note issued by or on behalf of the trustee of the unit trust is treated, for the purposes of subparagraphs (1)(f)(ii) and (2)(e)(ii), as having owned the unit from the time when it last acquired the convertible note. (6) Subsection (4) or (5) applies whether or not the acquisition of the *convertible note, or convertible preference share, was an *eligible venture capital investment. (7) A partnership that converts a *convertible note into a share or a unit is treated, for the purposes of subparagraphs (1)(f)(ii) and (2)(e)(ii), as continuing to own the convertible note until the partnership no longer owns the share or unit. 17 Subsection 118‑415(3) (heading) Repeal the heading, substitute: Effect of converting convertible notes etc. 18 At the end of section 118‑415 Add: (4) An entity that acquired a unit in a unit trust by converting a *convertible note issued by or on behalf of the trustee of the unit trust is treated, for the purposes of subparagraph (1)(c)(ii), as having owned the unit from the time when it last acquired the convertible note. (5) Subsection (3) or (4) applies whether or not the acquisition of the *convertible note, or convertible preference share, was an *eligible venture capital investment. (6) An entity that converts a *convertible note into a share or a unit is treated, for the purposes of subparagraph (1)(c)(ii), as continuing to own the convertible note until the entity no longer owns the share or unit. 19 Paragraph 118‑420(1)(c) Omit "meets the requirements set out in subsection (6)", substitute "is a foreign resident who is not a *general partner of a *VCLP or an *ESVCLP and is neither a *tax‑exempt foreign resident nor a *foreign venture capital fund of funds". 20 Paragraph 118‑420(3)(b) Repeal the paragraph, substitute: (b) the entity is not a *general partner of a *VCLP or an *ESVCLP; and 21 Paragraph 118‑420(4)(a) Repeal the paragraph, substitute: (a) the partnership was established in a foreign country; and 22 Paragraph 118‑420(4)(b) Omit "a resident of a country referred to in paragraph (a)", substitute "a foreign resident". 23 Paragraph 118‑420(5)(b) Repeal the paragraph, substitute: (b) the entity was established in a foreign country; and 24 Paragraph 118‑420(5)(c) Omit "a resident of a country referred to in paragraph (b)", substitute "a foreign resident". 25 Subsection 118‑420(6) Repeal the subsection. 26 Section 118‑425 (heading) Repeal the heading, substitute: 118‑425 Meaning of eligible venture capital investment—investments in companies 27 Paragraph 118‑425(1)(b) Omit "either". 28 Subparagraph 118‑425(1)(b)(ii) Omit "and", substitute "or". 29 At the end of paragraph 118‑425(1)(b) Add: (iii) an acquisition of *convertible notes (other than convertible notes that are *debt interests) issued by a company; and 30 At the end of subsection 118‑425(2) Add: Note: A company that fails to meet the requirements of this subsection can still be eligible in certain circumstances: see subsection (12A). 31 Subsection 118‑425(5) After "company must", insert ", at the end of, and at all times after the end of, the income year in which the investment is made,". 32 Paragraphs 118‑425(5)(a) and (b) Omit "a company auditor", substitute "an auditor". 33 Subsection 118‑425(5) (note) Repeal the note, substitute: Note: This requirement is ongoing. 34 Subsection 118‑425(9) Omit "(including a *convertible note)". 35 Subsection 118‑425(10) (heading) Repeal the heading, substitute: The value of an asset or investment 36 Subsection 118‑425(10) Omit "of an entity", substitute ", or an investment, of an entity at a particular time". 37 Subsection 118‑425(10) After "the asset", insert "or investment". 38 Subparagraph 118‑425(11)(a) After "options in", insert ", or *convertible notes issued by,". 39 Paragraph 118‑425(11)(b) After "another company", insert "or a unit trust". 40 Subparagraph 118‑425(11)(c)(i) Repeal the subparagraph, substitute: (i) in acquiring shares or options in, or convertible notes issued by, the other company, or in acquiring units or options in, or convertible notes issued by or on behalf of the trustee of, the unit trust; or (ia) in meeting incidental costs of any such acquisition; or 41 Subparagraph 118‑425(11)(c)(iii) After "other company", insert "or unit trust". 42 Paragraph 118‑425(11)(d) Repeal the paragraph, substitute: (d) within that period of 6 months and after the end of that period: (i) the other company meets the requirements of subsections (2) to (7); or (ii) the unit trust meets the requirements of subsections 118‑427(3) to (8); as the case requires. 43 After subsection 118‑425(12) Insert: Exception to requirements relating to location within Australia (12A) A company is taken to meet the requirements of subsection (2) in relation to an investment made by an entity if the sum of: (a) the value of the investment at the time the entity makes it; and (b) the total value of all the other investments that the entity owns at that time that do not, or apart from this subsection would not, meet those requirements; does not exceed 20% of the partnership's *committed capital. Note: See subsection (10) for the value of investments. 44 After section 118‑425 Insert: 118‑427 Meaning of eligible venture capital investment—investments in unit trusts Requirements for an eligible venture capital investment (1) An investment is an eligible venture capital investment if: (a) it is *at risk; and (b) it is either: (i) an acquisition of units in a unit trust; or (ii) an acquisition of options (including warrants) originally issued by or on behalf of the trustee of a unit trust to acquire units in the unit trust; or (iii) an acquisition of *convertible notes (other than convertible notes that are *debt interests) issued by or on behalf of the trustee of a unit trust; and (c) the unit trust meets the requirements of subsections (3) to (8); and (d) the sum of: (i) the total amount that the partnership has invested in all the *equity interests and *debt interests that the partnership owns in the unit trust; and (ii) the total amount that the partnership has invested in all the equity interests and debt interests that the partnership owns in any entities that are *connected entities of the unit trust; does not exceed 30% of the partnership's *committed capital. Certain entities not treated as connected entities (2) In applying subparagraph (1)(d)(ii), ignore an entity that is a *connected entity of the unit trust only because it is an *associate of the unit trust because of an investment made in the entity by the partnership. Location within Australia (3) The unit trust: (a) must, at the time the investment is made, carry on *business in Australia; and (b) must, at that time, meet at least one of the following requirements: (i) the central management and control of the unit trust is in Australia; (ii) more than 50% of the beneficial interests in the income of the unit trust are held by Australian residents; (iii) more than 50% of the beneficial interests in the property of the unit trust are held by Australian residents; and (c) if at that time the entity making the investment does not own any other investments in the unit trust—must meet the following requirements: (i) more than 50% of the people who are currently engaged by the trustee of the unit trust to perform services must perform those services primarily in Australia; (ii) more than 50% of its assets (determined by value) must be situated in Australia; during the whole of the period of 12 months, or such shorter period as the *Venture Capital Registration Board determines under section 25‑5 of the Venture Capital Act 2002, starting from the time the investment is made. However, subparagraph (c)(i) or (ii) does not apply to the unit trust if the Venture Capital Registration Board so determines under section 25‑10 of the Venture Capital Act 2002. Note: A company that fails to meet the requirements of this subsection can still be eligible in certain circumstances: see subsection (13). Predominant activity (4) The unit trust must satisfy at least 2 of these requirements: (a) more than 75% of the unit trust's assets (determined by value) must be used primarily in activities that are not ineligible activities mentioned in subsection (14); (b) more than 75% of the employees of the trustee of the unit trust must be engaged primarily in activities that are not ineligible activities mentioned in subsection (14); (c) more than 75% of the unit trust's total assessable income, *exempt income and *non‑assessable non‑exempt income must come from activities that are not ineligible activities mentioned in subsection (14). Note 1: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made. Note 2: See subsection (11) for the value of assets. Note 3: A unit trust that fails to meet at least 2 of the requirements can still be eligible if the Venture Capital Registration Board determines that the unit trust's primary activity is not ineligible and the failure is temporary: see subsection (15). Investment in other entities etc. (5) The unit trust must not: (a) invest, in another entity, any part of the amount invested, unless the other entity: (i) is *connected with the unit trust (except another entity that is an *associate of the unit trust because of an investment made in the entity by the partnership); and (ii) meets the requirements of subsections (4) to (8); or (b) in the capacity of a trustee, use any part of the amount invested. However, this subsection does not prevent the unit trust from depositing money with an *ADI, or with a body authorised by or under a law of a foreign country to carry on banking business in that country. Note: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made. Registered auditor (6) The unit trust must, at the end of, and at all times after the end of, the income year in which the investment is made, have as its auditor: (a) a person registered as an auditor under a law in force in a State or a Territory; or (b) if the unit trust is no longer an Australian resident—a person registered as an auditor under a law in force in the country of which the unit trust is a resident. Note: This requirement is ongoing. Permitted entity value (7) The unit trust must not, immediately before the investment is made, exceed the *permitted entity value. Listing (8) The unit trust must be a unit trust whose units: (a) are, at the time the investment is made, not listed for quotation in the official list of a stock exchange in Australia or a foreign country; or (b) are so listed at that time, but cease to be so listed at any time during the 12 months after the investment is made. However, the unit trust is taken to meet the requirements of this subsection in relation to any investment made by an *ESVCLP (whether or not units in the unit trust are so listed). Note: The additional requirements for ESVCLPs deal with listing in relation to initial investments by ESVCLPs in unit trusts: see paragraph 118‑428(1)(a). Scrip for scrip investments (9) However, a unit trust is taken to meet the requirements of subsections (3) to (8) if: (a) the investment is an acquisition of units in that unit trust in exchange for units in another unit trust; and (b) at the time that the *VCLP, *ESVCLP, *AFOF or *eligible venture capital investor in question acquired the units being exchanged, the other unit trust meets the requirements of subsections (3) to (8), but not only because this subsection applies to the other unit trust; and (c) the units in the other unit trust that are being exchanged are all of the units in the other unit trust that the entity making the investment owned at the time of the exchange. Debt interests (10) To avoid doubt, a *debt interest cannot be an *eligible venture capital investment. The value of an asset or investment (11) The value of an asset or investment of an entity at a particular time for the purposes of this section is the value of the asset or investment as shown in a statement, prepared in accordance with the *accounting standards and audited by the entity's auditor, showing that value as at a time no longer than 12 months before that time. Application to groups (12) If a group of entities: (a) is treated as a *consolidated group because of a choice that a unit trust has made under section 713‑130; or (b) would be treated as a consolidated group because of such a choice: (i) if a unit trust were to make such a choice; or (ii) if a unit trust that is not a *corporate unit trust or a *public trading trust were such a trust and were to make such a choice; this section applies in relation to the entities as if: (c) the unit trust carried on, as the *head company of the consolidated group or consolidatable group, all of the activities that are carried on by the other members of the group; and (d) the assets, employees and income of the other members of the group were assets, employees and income of the unit trust; and (e) each of the other members of the group were parts of the unit trust rather than separate entities. Exception to requirements relating to location within Australia (13) A unit trust is taken to meet the requirements of subsection (3) in relation to an investment made by an entity if the sum of: (a) the value of the investment at the time the entity makes it; and (b) the total value of all the other investments that the entity owns at that time that do not, or apart from this subsection would not, meet those requirements; does not exceed 20% of the partnership's *committed capital. Note: See subsection (11) for the value of investments. Ineligible activities (14) These activities are ineligible activities: (a) property development or land ownership; (b) finance, to the extent that it is any of the following: (i) banking; (ii) providing capital to others; (iii) leasing; (iv) factoring; (v) securitisation; (c) insurance; (d) construction (including extension, improvement or up‑grading) or acquisition of infrastructure facilities (within the meaning of section 93L of the Development Allowance Authority Act 1992) or related facilities (within the meaning of section 93M of that Act), or both; (e) making investments, whether made directly or indirectly, that are directed to deriving income in the nature of interest, rents, dividends, royalties or lease payments. For the purposes of this subsection, activities that are ancillary or incidental to a particular activity are taken to form part of that activity. Venture Capital Registration Board discretion (15) A unit trust is taken to meet the requirements of subsection (4) even if it fails to satisfy at least 2 of the requirements in that subsection if the *Venture Capital Registration Board determines under section 25‑15 of the Venture Capital Act 2002 that: (a) the unit trust's primary activity is not an ineligible activity mentioned in subsection (14); and (b) the failure is temporary and did not exist at the time the investment referred to in subsection (1) was made and, if it has been disposed of, when it was disposed of. Convertible notes (16) To the extent that an investment by an entity consists of the acquisition of a unit in a unit trust by converting a *convertible note issued by or on behalf of the trustee of the unit trust, the investment is, for the purpose of determining whether the unit trust meets the requirements of subsections (3) to (8), taken to have been made at the time when the entity last acquired the convertible note. (17) Subsection (16) applies whether or not the acquisition of the *convertible note was an *eligible venture capital investment. 45 Paragraph 118‑430(a) Omit "shares", substitute "investment". 46 Paragraph 118‑430(b) Omit "shares", substitute "investment, including (if the investment relates to a unit trust) the maintenance of any conferrals of present entitlement to income or capital of the unit trust or to any distributions of income or capital of the unit trust". 47 Paragraph 118‑435(1)(b) After "company", insert "or all the units in a unit trust". 48 Paragraph 118‑435(1)(c) After "company", insert "or unit trust". 49 At the end of paragraph 118‑435(1)(d) Add ", or the unit trust meets the requirements of subsections 118‑427(3) to (8), as the case requires". 50 Paragraph 118‑435(2)(b) Repeal the paragraph, substitute: (b) at any time within the period of 12 months after the day on which the first *eligible venture capital investment was made in the company: (i) the other company ceases to be an Australian resident; or (ii) the unit trust ceases to carry on *business in Australia; as the case requires; 51 Paragraphs 118‑435(2)(c) and (d) After "company" (wherever occurring), insert "or unit trust". 52 Subsection 118‑440(1) (note) Repeal the note, substitute: Note: The time the entity makes the investment is, for a share acquired by converting a convertible note or convertible preference share or for a unit in a unit trust acquired by converting a convertible note, the time when the entity last acquired the convertible note or convertible preference share: see subsections 118‑425(15) and 118‑427(16). 53 Subsection 995‑1(1) (definition of eligible venture capital investment) Omit "section 118‑425", substitute "sections 118‑425 and 118‑427". Venture Capital Act 2002 54 Paragraph 9‑1(1)(a) Repeal the paragraph, substitute: (a) the partnership was established by or under a law in force in, or in any part of: (i) Australia; or (ii) a foreign country in respect of which a double tax agreement (as defined in Part X of the Income Tax Assessment Act 1936) is in force that is an agreement of a kind referred to in subparagraph (b)(i), (ia), (ii), (iii), (iv) or (v) of that definition; and 55 Paragraph 9‑1(1)(d) Omit "$20 million", substitute "$10 million". 56 Paragraph 9‑1(1)(e) Omit "either". 57 Subparagraph 9‑1(1)(e)(ii) Omit "and" (last occurring), substitute "or". 58 At the end of paragraph 9‑1(1)(e) Add: (iii) an investment in a unit trust, in which the partnership owns one or more eligible venture capital investments, that would have been an eligible venture capital investment but for subsections 118‑427(3) and (7) of the Income Tax Assessment Act 1997; and 59 Paragraph 9‑1(1)(f) Omit "or investments to which subparagraph (e)(ii) applies", substitute ", investments to which subparagraph (e)(ii) applies or investments to which subparagraph (e)(iii) applies". 60 Subparagraph 9‑5(1)(d)(ii) After "company", insert "or unit trust". 61 Subparagraph 9‑5(1)(d)(iii) Omit "and" (last occurring), substitute "or". 62 At the end of paragraph 9‑5(1)(d) Add: (iv) an investment in a unit trust referred to in subparagraph (ii) that would have been an eligible venture capital investment but for subsections 118‑427(3) and (7) of the Income Tax Assessment Act 1997; and 63 Paragraph 9‑5(1)(e) After "applies", insert "or investments to which subparagraph (d)(iv) applies,". 64 After paragraph 9‑10(1)(a) Insert: (aa) it is a loan made to a unit trust and the sum of: (i) the *equity interests that the partnership owns in the unit trust; and (ii) any *debt interests that the partnership owns in the unit trust that can be converted into equity interests in the unit trust; is at least 10% of the sum of: (iii) all of the equity interests in the unit trust; and (iv) all of the debt interests in the unit trust that can be converted into equity interests in the unit trust; and the unit trust meets the requirements of subsections 118‑427(3) to (8) of the Income Tax Assessment Act 1997 in relation to the investments referred to in subparagraphs (i) and (ii); or 65 Paragraph 15‑1(ga) Omit all the words from and including "whether", substitute: whether: (i) the company met the requirements of subsections 118‑425(3), (4) and (5) of the Income Tax Assessment Act 1997 at all times during that year; and (ii) if subsection 118‑425(11) of that Act applied to the company in relation to another company—the other company failed to meet the requirements of subparagraph 118‑425(11)(d)(i) of that Act at any time during that year; and (iii) if subsection 118‑425(11) of that Act applied to the company in relation to a unit trust—the unit trust failed to meet the requirements of subparagraph 118‑425(11)(d)(ii) of that Act at any time during that year; 66 After paragraph 15‑1(ga) Insert: (gb) for an investment in a unit trust that the partnership held throughout the financial year—a statement from a general partner as to whether the unit trust met the requirements of subsections 118‑427(4), (5) and (6) of the Income Tax Assessment Act 1997 at all times during that year; 67 Paragraph 15‑10(c) Omit all the words from and including "whether", substitute: whether: (i) the company met the requirements of subsections 118‑425(3), (4) and (5) of the Income Tax Assessment Act 1997 at all times during the quarter after the investment was made; and (ii) if subsection 118‑425(11) of that Act applied to the company in relation to another company—the other company failed to meet the requirements of subparagraph 118‑425(11)(d)(i) of that Act at any time during the quarter after the investment was made; and (iii) if subsection 118‑425(11) of that Act applied to the company in relation to a unit trust—the unit trust failed to meet the requirements of subparagraph 118‑425(11)(d)(ii) of that Act at any time during the quarter after the investment was made; and 68 Paragraph 15‑10(d) Omit all the words from and including "whether", substitute: whether: (i) the company met the requirements of subsections 118‑425(3), (4) and (5) of the Income Tax Assessment Act 1997 at all times during the quarter up to the day of disposal; and (ii) if subsection 118‑425(11) of that Act applied to the company in relation to another company—the other company failed to meet the requirements of subparagraph 118‑425(11)(d)(i) of that Act at any time during the quarter up to the day of disposal; and (iii) if subsection 118‑425(11) of that Act applied to the company in relation to a unit trust—the unit trust failed to meet the requirements of subparagraph 118‑425(11)(d)(ii) of that Act at any time during the quarter up to the day of disposal; and 69 At the end of section 15‑10 Insert: (e) for each investment in a unit trust made during the quarter—a statement from a general partner as to whether the unit trust met the requirements of subsections 118‑427(4), (5) and (6) of the Income Tax Assessment Act 1997 at all times during the quarter after the investment was made; and (f) for each disposal of an investment in a unit trust during the quarter—a statement from a general partner as to whether the unit trust met those requirements at all times during the quarter up to the day of disposal. 70 Paragraph 21‑5(3)(d) After "*company", insert "or unit trust". 71 Paragraph 21‑5(3)(d) After "the company", insert "or unit trust". 72 Paragraph 21‑5(3)(f) After "company", insert "or unit trust". 73 Paragraph 21‑20(1)(g) Omit all the words from and including "whether", substitute: whether: (i) the company met the requirements of subsections 118‑425(3), (4) and (5) of the Income Tax Assessment Act 1997 at all times during that year; and (ii) if subsection 118‑425(11) of that Act applied to the company in relation to another company—the other company failed to meet the requirements of subparagraph 118‑425(11)(d)(i) of that Act at any time during that year; and (iii) if subsection 118‑425(11) of that Act applied to the company in relation to a unit trust—the unit trust failed to meet the requirements of subparagraph 118‑425(11)(d)(ii) of that Act at any time during that year; 74 Paragraph 21‑20(1)(h) Omit all the words from and including "whether", substitute: whether: (i) the company met the requirements of subsections 118‑425(3), (4) and (5) of the Income Tax Assessment Act 1997 at all times during that year after the investment was made; and (ii) if subsection 118‑425(11) of that Act applied to the company in relation to another company—the other company failed to meet the requirements of subparagraph 118‑425(11)(d)(i) of that Act at any time during that year after the investment was made; and (iii) if subsection 118‑425(11) of that Act applied to the company in relation to a unit trust—the unit trust failed to meet the requirements of subparagraph 118‑425(11)(d)(ii) of that Act at any time during that year after the investment was made; 75 Paragraph 21‑20(1)(i) Omit all the words from and including "whether", substitute: whether: (i) the company met the requirements of subsections 118‑425(3), (4) and (5) of the Income Tax Assessment Act 1997 at all times during that year up to the day of disposal; and (ii) if subsection 118‑425(11) of that Act applied to the company in relation to another company—the other company failed to meet the requirements of subparagraph 118‑425(11)(d)(i) of that Act at any time during that year up to the day of disposal; and (iii) if subsection 118‑425(11) of that Act applied to the company in relation to a unit trust—the unit trust failed to meet the requirements of subparagraph 118‑425(11)(d)(ii) of that Act at any time during that year up to the day of disposal; 76 At the end of subsection 21‑20(1) Add: (j) for each investment in a unit trust that the entity held throughout that year—a statement as to whether the unit trust met the requirements of subsections 118‑427(4), (5) and (6) of the Income Tax Assessment Act 1997 at all times during that year; (k) for each investment in a unit trust that the entity made during that year—a statement as to whether the unit trust met those requirements at all times during that year after the investment was made; (l) for each investment in a unit trust that the entity disposed of during that year—a statement as to whether the unit trust met those requirements at all times during that year up to the day of disposal. 77 Section 25‑1 Omit "paragraph 18‑425(2)(b)", substitute "paragraphs 118‑425(2)(b) and 118‑427(3)(c)". 78 Section 25‑1 (note) Repeal the note, substitute: Note 1: Paragraph 118‑425(2)(b) of the Income Tax Assessment Act 1997 is about how closely a company is connected with Australia. Paragraph 118‑427(3)(c) of that Act is about how closely a unit trust is connected with Australia. These paragraphs are one of the requirements that a company or unit trust must meet in order for investments in the company or unit trust to be eligible venture capital investments. Note 2: The capital gains tax exemption under Subdivision 118‑F of that Act only applies in relation to eligible venture capital investments. 79 After subsection 25‑5(1) Insert: (1A) The *Venture Capital Registration Board may, on the application of a *general partner of a *limited partnership registered as a *VCLP, an *ESVCLP or an *AFOF, determine a shorter period during which a unit trust must meet the requirements of paragraph 118‑427(3)(c) of the Income Tax Assessment Act 1997. 80 Subsection 25‑5(2) Omit "The application", substitute "An application under this section". 81 After subsection 25‑10(1) Insert: (1A) The *Venture Capital Registration Board may, on the application of a *general partner of a partnership registered as a *VCLP, an *ESVCLP or an *AFOF, determine that either or both of the following requirements do not apply to a unit trust: (a) the requirement referred to under subparagraph 118‑427(3)(c)(i) of the Income Tax Assessment Act 1997 that more than 50% of the people who are currently engaged by the unit trust to perform services must perform those services primarily in Australia; (b) the requirement referred to under subparagraph 118‑427(3)(c)(ii) of that Act that more than 50% of its assets (determined by value) must be situated in Australia. 82 Subsection 25‑10(2) Omit "The application", substitute "An application under this section". 83 After subsection 25‑15(1) Insert: (1A) The *Venture Capital Registration Board may, on the application of a *general partner of a partnership registered as a *VCLP, an *ESVCLP or an *AFOF, determine that: (a) a unit trust's primary activity is not an ineligible activity mentioned in subsection 118‑427(14) of the Income Tax Assessment Act 1997; and (b) the unit trust's failure to satisfy at least 2 of the requirements in subsection 118‑427(4) of that Act is temporary and did not exist at the time the relevant investment in the unit trust was made and, if it has been disposed of, when it was disposed of. 84 Subsection 25‑15(2) Omit "The application", substitute "An application under this section". 85 Application The amendments of the Income Tax Assessment Act 1997 made by this Part apply to assessments for the 2007‑2008 year of income and later years of income. Part 2—Early stage venture capital limited partnerships Income Tax Assessment Act 1936 86 Subsection 6(1) Insert: ESVCLP means an early stage venture capital limited partnership within the meaning of subsection 118‑407(4) of the Income Tax Assessment Act 1997. 87 Subsections 18A(1) and (2) After "VCLP", insert ", an ESVCLP". Note: The heading to section 18A is altered by inserting ", ESVCLPs" after "VCLPs". 88 Paragraphs 92(2AA)(b) and 92A(1)(b) After "VCLP", insert ", an ESVCLP". 89 Subsection 94D(2) After "VCLP", insert ", an ESVCLP". 90 Subsection 94D(2) (note 1) After "VCLP", insert ", an ESVCLP". 91 Subsection 94D(2) (note 2) After "VCLPs", insert ", ESVCLPs". 92 Subsection 94D(2) (note 3) After "VCLP", insert ", ESVCLP". 93 Paragraph 94D(3)(a) Omit "either or both", substitute "one or more". 94 After subparagraph 94D(3)(a)(i) Insert: (ia) one or more ESVCLPs; 95 Subparagraph 128B(3)(h)(ii) After "VCLP", insert ", ESVCLP". Income Tax Assessment Act 1997 96 Subsection 4‑10(2) (note 2) After "VCLP", insert ", an ESVCLP". 97 Subsection 9‑5(2) (note 2) After "VCLP", insert ", an ESVCLP". 98 Section 11‑15 (table item dealing with foreign investment) Repeal the item. 99 Section 11‑15 (after the table item dealing with United Nations) Insert: venture capital eligible venture capital investments, gain or profit from realisation of 51‑54 eligible venture capital investments by ESVCLPs, income derived from 51‑52 venture capital equity, gain or profit from realisation of.. 51‑55 100 Subsection 26‑68(1) (heading) Repeal the heading, substitute: Partners in VCLPs and ESVCLPs 101 Paragraph 26‑68(1)(a) After "*VCLP", insert ", or an *ESVCLP,". 102 At the end of paragraph 26‑68(1)(b) Add "or 118‑407". 103 Subparagraph 26‑68(2)(a)(ii) After "*VCLP", insert ", or an *ESVCLP,". 104 Section 36‑25 (table headed "Tax losses of VCLPs, AFOFs and VCMPs") Omit the table, substitute: Tax losses of VCLPs, ESVCLPs, AFOFs and VCMPs Item For the special rules about this situation ... See: 1. A limited partnership that has a tax loss becomes a VCLP, an ESVCLP, an AFOF or a VCMP: it cannot deduct the loss while it is a VCLP, an ESVCLP, an AFOF or a VCMP. Subdivision 195‑B 105 After section 51‑50 Insert: 51‑52 Income derived from eligible venture capital investments by ESVCLPs General (1) An entity's share of income derived from an *eligible venture capital investment is exempt from income tax if: (a) the entity is a partner in a *lim