Income Tax Assessment Act 1997

s 118-147 — Absence from dwelling replacing main residence that was compulsorily acquired, destroyed etc.

(1) This section applies if: (a) a * dwelling (the old dwelling ) is treated as your main residence because of your choice under section 118 ‑ 145; and (b) because of an event (the key event ) described in subsection 124 ‑ 70(1): (i) you cease to have any * ownership interest in the old dwelling; or (ii) the old dwelling is lost or destroyed; and (c) after the key event you have an ownership interest (the substitute property interest ) in: (i) a dwelling (the substitute dwelling ); or (ii) land (the substitute land ) that did not have a dwelling on it at the later of the time just after the key event and the time you * acquired the interest; and (d) you acquired the substitute property interest at a time (the substitute property acquisition time ) no later than one year, or within such further time as the Commissioner allows in special circumstances, after the end of the income year in which the key event happens. Note 1: Subsection 124 ‑ 70(1) deals with compulsory acquisitions, disposals in circumstances involving powers of compulsory acquisition, expiry of leases granted by Australian government agencies and loss or destruction of a CGT asset. Note 2: The substitute property acquisition time may be before, at or after the time the key event happened. The old dwelling and the substitute dwelling may be different or the same. The land on which the old dwelling is erected and the substitute land may be different or the same. (2) You may choose to treat the substitute dwelling, or a * dwelling you built on the substitute land within 4 years after the later of the time of the key event and the substitute property acquisition time, as your main residence from the later of the following times (or from either of them if they are the same): (a) the substitute property acquisition time; (b) the time one year before the key event happened. (3) Subsection (4) limits the time you can treat a * dwelling as your main residence under this section if you use all or part of it or the substitute land, after the later of the key event and the substitute property acquisition time, for the * purpose of producing assessable income. (4) The maximum period you can treat the * dwelling that way while you use it or the substitute land as described in subsection (3) is: (a) 6 years; or (b) if, just before the key event, you used all or part of the old dwelling for that purpose—so much of the period of 6 years described in subsection 118 ‑ 145(2) in relation to the old dwelling as had not passed before the event. (5) If you do not use the * dwelling or substitute land as described in subsection (3) you can treat the dwelling as your main residence under this section indefinitely. (6) If you make the choice: (a) you cannot treat any other * dwelling as your main residence while you apply this section; and (b) section 118 ‑ 140 does not apply in relation to your * acquisition, while you still have an * ownership interest in the old dwelling, of an ownership interest in the dwelling you choose to treat as your main residence under this section; and (c) section 118 ‑ 150 does not apply after the key event to the land on which the old dwelling is erected or the substitute land; and (d) section 118 ‑ 155 does not apply after the key event in relation to the old dwelling, the substitute dwelling or a dwelling built on the substitute land. (7) Paragraph (6)(a) does not prevent the old dwelling from being your main residence at any time before the key event happened.

Amendment history: Inserted by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 118-150 — If you build, repair or renovate a dwelling

(1) This section applies to land in which you have an * ownership interest (except a life interest) if you build a * dwelling on the land, or repair, renovate or finish building a dwelling on the land. (2) You can choose to apply this Subdivision as if the * dwelling that you are building, repairing or renovating on the land were your main residence from the time you * acquired the * ownership interest. (3) You can make the choice only if: (a) a * dwelling on the land that you construct, repair or renovate becomes your main residence (except because of section 118 ‑ 147) as soon as practicable after the work is finished; and (b) it continues to be your main residence for at least 3 months. (4) There is a time limit during which the choice can operate. This is the shorter of: (a) 4 years, or a longer time allowed by the Commissioner, before the * dwelling becomes your main residence; and (b) the period starting when you * acquired your * ownership interest in the land and ending when the dwelling becomes your main residence. (5) If there was already a * dwelling on the land when you * acquired your * ownership interest and you or someone else occupied it after that time, the period in subsection (2) and paragraph (4)(b) starts when the dwelling ceased to be occupied. (6) Once you make the choice, no other * dwelling can be treated as your main residence during the period referred to in subsection (4), except if section 118 ‑ 140 (about changing main residences) applies.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011

s 118-155 — Where individual referred to in section 118 ‑ 150 dies

(1) This section applies if the individual referred to in subsection 118 ‑ 150(1) dies: (a) after the work began, or the individual entered into a contract for it to be done, but before it was finished; or (b) after the work was finished but before it was practicable for the * dwelling to become the individual’s main residence; or (c) during the period of 3 months referred to in paragraph 118 ‑ 150(3)(b). (2) If the individual owned the interest in the land as a joint tenant, the surviving joint tenant or, if none, the trustee of the individual’s estate, can choose to apply this Subdivision as if the * dwelling were the main residence of the individual: (a) when the individual died; and (b) for the shorter of: (i) 4 years before the individual’s death; or (ii) the period starting when the individual * acquired the interest in the land and ending when the individual died. (3) If there was already a * dwelling on the land when the individual * acquired the interest in the land and someone occupied it after that time, the period in subparagraph (2)(b)(ii) starts when the dwelling ceased to be occupied so that it could be repaired or renovated. (4) If the * dwelling is treated as the deceased’s main residence under this section, no other dwelling can be treated as the deceased’s main residence at the same time. (5) However, this section does not apply if, just before the individual’s death, the individual was an * excluded foreign resident.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-160 — Destruction of dwelling and sale of land

(1) This section applies if a * dwelling that is your main residence is accidentally destroyed and a * CGT event happens in relation to the land on which it was built without you erecting another dwelling on the land. (2) You can choose to apply this Subdivision to the land as if, from the time of the destruction until your * ownership interest in the land ends, the * dwelling had not been destroyed and were your main residence. (3) If you do so, you cannot treat any other * dwelling as your main residence during that period, except under section 118 ‑ 140 (about changing main residences).

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4))

s 118-165 — Separate CGT event for adjacent land or other structures

The exemption does not apply to a * CGT event that happens in relation to land, or a garage, storeroom or other structure, to which the exemption can extend under section 118 ‑ 120 (about adjacent land) if that event does not also happen in relation to the * dwelling or your * ownership interest in it. Note: There is a separate rule for a CGT event that is a compulsory acquisition (or similar arrangement) happening to adjacent land but not also to the dwelling itself: see section 118 ‑ 245.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 118-170 — Spouse having different main residence

(1) If, during a period, a * dwelling is your main residence and another * dwelling is the main residence of your * spouse (except a spouse living permanently separately and apart from you), you and your spouse must either: (a) choose one of the dwellings as the main residence of both of you for the period; or (b) nominate the different dwellings as your main residences for the period. (2) If you nominate the different * dwellings as your main residences for the period, you split the exemption in accordance with subsections (3) and (4). (3) If your interest in the * dwelling you chose was not, during the period, more than half of the total interests in the dwelling, the dwelling is taken to have been your main residence during the period. Otherwise, the dwelling is taken to have been your main residence for half of the period. (4) If your * spouse’s interest in the * dwelling your spouse chose was not , during the period, more than half of the total interests in the dwelling, the dwelling is taken to have been your spouse’s main residence during the period. Otherwise, the dwelling is taken to have been your spouse’s main residence for half of the period. Example: You and your spouse (who are Australian residents) own a town house as tenants in common in equal shares. You and your spouse also own a beach house as tenants in common, with your interest being 30% and your spouse’s 70%. From 1 July 1999, you live mainly in the town house and your spouse lives mainly in the beach house. On 1 July 2000 you and your spouse dispose of both dwellings. For the period 1 July 1999 ‑ 30 June 2000 you nominate the town house as your main residence and your spouse nominates the beach house. The town house is taken to be your main residence during the period. The beach house is taken to be your spouse’s main residence during half the period.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-175 — Dependent child having different main residence

If, at a particular time, a * dwelling is your main residence and another * dwelling is the main residence of a * child of yours who is under 18 and is dependent on you for economic support, you must choose one of them as the main residence of both of you.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4))

s 118-178 — Previous roll ‑ over under Subdivision 126 ‑ A

(1) This section applies to you if: (a) you * acquired an * ownership interest in a * dwelling from another person (your former partner ) as a result of a * CGT event (the earlier event ); and (b) your former partner acquired the ownership interest on or after 20 September 1985; and (c) there was a roll ‑ over under Subdivision 126 ‑ A (marriage or relationship breakdown roll ‑ over) for the earlier event; and (d) a CGT event (the later event ) happens in relation to the ownership interest. (2) This Subdivision applies to the later event in the way that it would if: (a) your * ownership interest had commenced when your former partner’s ownership interest commenced (the acquisition time ); and (b) from the acquisition time until the time your former partner’s ownership interest ended: (i) you had used the * dwelling in the same way that your former partner used it; and (ii) the dwelling had been your main residence for the same number of days as it was your former partner’s main residence. Example 1: Peter (the transferor spouse) is the 100% owner of a dwelling that he uses only as a main residence before transferring it to Susan (the transferee spouse). Susan uses the dwelling only as a rental property. Susan will be eligible for a partial main residence exemption having regard to how both Peter and Susan used the dwelling if, at the time the dwelling is sold, Susan is an Australian resident. Example 2: Caroline (the transferor spouse) is the 100% owner of a dwelling that she uses only as a rental property before transferring it to David (the transferee spouse). David uses the dwelling only as a main residence. David will be eligible for only a partial main residence exemption having regard to how both Caroline and David used the dwelling if, at the time the dwelling is sold, David is an Australian resident.

Amendment history: Inserted by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 144 of 2008, effective Schedule 14 (items 59–96): 10 Dec 2008 | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-180 — Acquisition of dwelling from company or trust on marriage or relationship breakdown—roll ‑ over provision applying

(1) This Subdivision applies to you as if you owned an * ownership interest in land or a dwelling during a period when it was actually owned by a company or trustee if: (a) you * acquired the interest from the company or trustee; and (b) it was acquired by the company or trustee on or after 20 September 1985; and (c) a roll ‑ over was available to the company or trustee under Subdivision 126 ‑ A. (2) If subsection (1) applies to a * dwelling, it cannot be treated as your main residence during the period, despite other provisions of this Subdivision that would allow you to treat it as your main residence during the period.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 144 of 2008, effective Schedule 14 (items 59–96): 10 Dec 2008

s 118-185 — Partial exemption where dwelling was your main residence during part only of ownership period

(1) You get only a partial exemption for a * CGT event that happens in relation to a * dwelling or your * ownership interest in it if: (a) you are an individual; and (b) the dwelling was your main residence for part only of your * ownership period; and (c) the interest did not * pass to you as a beneficiary in, and you did not * acquire it as a trustee of, the estate of a deceased person. (2) You calculate your * capital gain or * capital loss using the formula: where: CG or CL amount is the * capital gain or * capital loss you would have made from the * CGT event apart from this Subdivision. non ‑ main residence days is the number of days in your * ownership period when the * dwelling was not your main residence. Note: The capital gain or loss may be further adjusted if the dwelling was used to produce assessable income: see section 118 ‑ 190. Example: You bought a house in July 2020 and moved in immediately. In July 2023, you moved out and began to rent it. You sold it in July 2030, making (apart from this Subdivision) a capital gain of $10,000. At the time you sold the house, you were an Australian resident. You choose to continue to treat the dwelling as your main residence under section 118 ‑ 145 (about absences) for the first 6 of the 7 years during which you rented the house out. Under this section, you will be taken to have made a capital gain of: (3) However, this section does not apply if, at the time the * CGT event happens, you: (a) are an * excluded foreign resident; or (b) are a foreign resident who does not satisfy the * life events test.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-190 — Use of dwelling for producing assessable income

(1) You get only a partial exemption for a * CGT event that happens in relation to a * dwelling or your * ownership interest in it if: (a) apart from this section, because the dwelling was your main residence or someone else’s during a period: (i) you would not make a * capital gain or * capital loss from the event; or (ii) you would make a lesser capital gain or loss than if this Subdivision had not applied; and (b) the dwelling was used for the * purpose of producing assessable income during all or a part of that period; and (c) if you had incurred interest on money borrowed to * acquire the dwelling, or your ownership interest in it, you could have deducted some or all of that interest. Example: You acquire a house as a beneficiary in a deceased estate, rent it out for 12 months and sell it within 2 years of the deceased’s death. You can ignore the rental because the exemption does not require the house to be your main residence during the 2 years after the death. (2) The * capital gain or * capital loss that you would have made apart from this section from the * CGT event is increased by an amount that is reasonable having regard to the extent to which you would have been able to deduct that interest. (3) However, you ignore any use of the * dwelling for the * purpose of producing assessable income during any period that you continue to treat it as your main residence under section 118 ‑ 145 (about absences) to the extent that any part of it was not used for that purpose just before it last ceased to be your main residence. Example: To continue the example from section 118 ‑ 185, assume that, when you moved in, you used 1 / 4 of the house as a doctor’s surgery. Under section 118 ‑ 185, your capital gain was $1,000. Under this section, it would be reasonable to add an amount of: You have a total capital gain of $3,250 on the sale of the house. (3A) Also, you ignore any use of the * dwelling for the * purpose of producing assessable income during any period that you treat it as your main residence under section 118 ‑ 147 (about absences) to the extent that any part of the old dwelling mentioned in that section was not used for that purpose just before the old dwelling last ceased to be your main residence. (4) If a * dwelling or your * ownership interest in a dwelling * passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate, you ignore any use of the * dwelling for the * purpose of producing assessable income before the deceased’s death if: (a) the dwelling was the deceased’s main residence just before the death; and (b) it was not being used for that purpose just before the death, or any use for that purpose just before the death was ignored because of subsection (3).

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 118-192 — Special rule for first use to produce income

(1) There is a special rule if: (a) you would get only a partial exemption under this Subdivision for a * CGT event happening in relation to a * dwelling or your * ownership interest in it because the dwelling was used for the * purpose of producing assessable income during your * ownership period; and (aa) that use occurred for the first time after 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; and (b) you would have got a full exemption under this Subdivision if the CGT event had happened just before the first time (the income time ) it was used for that purpose during your ownership period. (2) You are taken to have * acquired the * dwelling or your * ownership interest at the income time for its * market value at that time. (3) If your * ownership interest in the * dwelling * passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate and the * CGT event did not happen within 2 years of the deceased’s death, you apply this Subdivision as if: (a) you had * acquired the interest as an individual and not as a beneficiary or trustee of a deceased estate; and (b) for applying the formula in section 118 ‑ 185, your non ‑ main residence days were the number of days in your * ownership period when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118 ‑ 195. Note: There are special rules for dwellings acquired before 7.30 pm on 20 August 1996: see section 118 ‑ 195 of the Income Tax (Transitional Provisions) Act 1997 .

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Amended by No 114 of 2000, effective Schedule 4 (items 43, 44): 1 July 1998 Remainder: Royal Assent | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20)

s 118-195 — Dwelling acquired from a deceased estate

(1) A * capital gain or * capital loss you make from a * CGT event that happens in relation to a * dwelling or your * ownership interest in it is disregarded if: (a) you are an individual and the interest * passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied; and (c) the deceased was not an * excluded foreign resident just before the deceased’s death. Beneficiary or trustee of deceased estate acquiring interest Item One of these items is satisfied And also one of these items 1 the deceased * acquired the * ownership interest on or after 20 September 1985 and the * dwelling was the deceased’s main residence just before the deceased’s death and was not then being used for the * purpose of producing assessable income your * ownership interest ends within 2 years of the deceased’s death, or within a longer period allowed by the Commissioner 2 the deceased * acquired the * ownership interest before 20 September 1985 the * dwelling was, from the deceased’s death until your * ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased’s will; or (c) if the * CGT event was brought about by the individual to whom the * ownership interest * passed as a beneficiary—that individual Note 1: You may make a capital gain or capital loss if the dwelling was used for the purpose of producing assessable income: see section 118 ‑ 190. Note 2: In some cases the use of a dwelling to produce assessable income can be disregarded: see sections 118 ‑ 145 and 118 ‑ 190. Note 3: There are special rules for dwellings acquired before 7.30 pm on 20 August 1996. These rules also affect the operation of section 118 ‑ 192 and subsections 118 ‑ 190(4) and 118 ‑ 200(4): see section 118 ‑ 195 of the Income Tax (Transitional Provisions) Act 1997 . (1A) For the purposes of a provision of this Subdivision that applies the table in subsection (1): (a) disregard paragraphs (a) and (b) in column 3 of item 2 of the table if, just before the deceased’s death, the deceased was an * excluded foreign resident; and (b) disregard paragraph (c) in column 3 of item 2 of the table if, at the time the relevant * CGT event happened, the individual was an excluded foreign resident. Note: The other provisions that apply the table include paragraph 118 ‑ 192(3)(b), subsection 118 ‑ 200(2), paragraph 118 ‑ 225(3)(c) and section 118 ‑ 260. (2) Only these * CGT events are relevant: (a) CGT events A1, B1, C1, C2, E1, E2, F2, K3, K4 and K6 (except one involving the forfeiting of a deposit); and (b) a CGT event that involves the forfeiting of a deposit as part of an uninterrupted sequence of transactions ending in one of the events specified in paragraph (a) subsequently happening. Note: The full list of CGT events is in section 104 ‑ 5.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Amended by No 12 of 2012, effective s 4, Sch 2 (items 1–23), Sch 5 and Sch 6 (items 3–6, 11–20, 25, 26, 35–67, 74–83, 94–96, 117–142, 157–178, 183, 200–203, 214–217, 235–240, 248): 21 Mar 2012 (s 2(1) items 1, 3, 5, 6, 10, 14, 18, 19, 27, 31) Sch 6 (item 7): 1 July 2007 (s 2(1) item 7) Sch 6 (item 10): 1 July 2010 (s 2(1) item 9) Sch 6 (items 106–116): 22 Mar 2012 (s 2(1) items 16, 17) Sch 6 (item 143): 22 Jan 2013 (s 2(1) item 20) Sch 6 (items 146–148): never commenced (s 2(1) item 23) Sch 6 (items 179, 181): 3 Oct 2008 (s 2(1) items 28, 30) Sch 6 (item 180): 3 June 2010 (s 2(1) item 29) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-197 — Special rule for surviving joint tenant

This Subdivision applies to you as if the * ownership interest of another individual in a * dwelling had * passed to you as a beneficiary in a deceased estate if: (a) you and the other individual owned ownership interests in the dwelling as joint tenants; and (b) the other individual dies.

Amendment history: Inserted by No 114 of 2000, effective Schedule 4 (items 43, 44): 1 July 1998 Remainder: Royal Assent

s 118-200 — Partial exemption for deceased estate dwellings

(1) You get only a partial exemption (or no exemption) if: (a) you are an individual and your * ownership interest in a * dwelling * passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) section 118 ‑ 195 does not apply. (2) You calculate your * capital gain or * capital loss using the formula: where: CG or CL amount is the * capital gain or * capital loss you would have made from the * CGT event apart from this Subdivision. non ‑ main residence days is the sum of: (a) if the deceased * acquired the * ownership interest on or after 20 September 1985—the number of days in the deceased’s * ownership period when the * dwelling was not the deceased’s main residence; and (aa) if the deceased acquired the ownership interest on or after 20 September 1985 and, just before the deceased’s death, the deceased was an * excluded foreign resident—the number of remaining days in the deceased’s ownership period; and (b) the number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118 ‑ 195. total days is: (a) if the deceased * acquired the * ownership interest before 20 September 1985—the number of days in the period from the death until your ownership interest ends; or (b) if the deceased acquired the ownership interest on or after that day—the number of days in the period from the acquisition of the dwelling by the deceased until your ownership interest ends. (3) However, you can adjust the formula by ignoring any non ‑ main residence days and total days in the period from the deceased’s death until your * ownership interest ended, if: (a) the deceased * acquired the ownership interest on or after 20 September 1985; and (b) your ownership interest ends within: (i) 2 years of the deceased’s death; or (ii) a longer period allowed by the Commissioner; and (c) you get a more favourable result by doing so; and (d) the deceased was not an * excluded foreign resident just before the deceased’s death. Note 1: The formula in this section will be adjusted (or further adjusted) under section 118 ‑ 205 if the deceased acquired the dwelling through a deceased estate. Note 2: There may be a further adjustment if the dwelling was used for the purpose of producing assessable income: see section 118 ‑ 190. (4) You ignore any non ‑ main residence days before the deceased’s death if: (a) the * dwelling was the deceased’s main residence just before the death; and (b) the dwelling was not being used for the * purpose of producing assessable income just before the death, or any use for that purpose just before the death was ignored because of subsection 118 ‑ 190(3) or (3A); and (c) the deceased was not an * excluded foreign resident just before the deceased’s death.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 12 of 2012, effective s 4, Sch 2 (items 1–23), Sch 5 and Sch 6 (items 3–6, 11–20, 25, 26, 35–67, 74–83, 94–96, 117–142, 157–178, 183, 200–203, 214–217, 235–240, 248): 21 Mar 2012 (s 2(1) items 1, 3, 5, 6, 10, 14, 18, 19, 27, 31) Sch 6 (item 7): 1 July 2007 (s 2(1) item 7) Sch 6 (item 10): 1 July 2010 (s 2(1) item 9) Sch 6 (items 106–116): 22 Mar 2012 (s 2(1) items 16, 17) Sch 6 (item 143): 22 Jan 2013 (s 2(1) item 20) Sch 6 (items 146–148): never commenced (s 2(1) item 23) Sch 6 (items 179, 181): 3 Oct 2008 (s 2(1) items 28, 30) Sch 6 (item 180): 3 June 2010 (s 2(1) item 29) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-205 — Adjustment if dwelling inherited from deceased individual

(1) You must adjust the formula in subsection 118 ‑ 200(2) if the * ownership interest of the deceased individual referred to in section 118 ‑ 200 (the most recently deceased ) * passed to the individual on or after 20 September 1985 as a beneficiary in, or the individual owned it as trustee of, a deceased estate. Note: Any gains or losses of individuals earlier in the inheritance chain are included in the gain or loss you would have made apart from this Subdivision. This section adjusts the formula to take account of times when the dwelling was the main residence of the individuals. (2) Add to the component total days in the formula the fewer of: (a) the number of days between 20 September 1985 and the day when the interest * passed to or was * acquired as trustee by the most recently deceased; and (b) the number of days between the time when an * ownership interest in the * dwelling was last acquired on or after 20 September 1985 by an individual except as a beneficiary in a deceased estate or as trustee of a deceased estate and the day when the interest passed to or was acquired as trustee by the most recently deceased. (3) Add to the component non ‑ main residence days in the formula the number of days in the period applicable under subsection (2) that the * dwelling was not the main residence of one or more of: (a) an individual who owned the dwelling at the time of the individual’s death; or (b) an individual who, immediately before the death of an individual referred to in paragraph (a), was the spouse of that individual (except a spouse who was living permanently separately and apart from the individual); or (c) an individual who had a right to occupy the dwelling under a will; or (d) an individual to whom an * ownership interest in the dwelling * passed as a beneficiary in, or who * acquired an ownership interest in the dwelling as trustee of, a deceased estate. (4) Add to the component non ‑ main residence days in the formula the number of days in the period applicable under subsection (2) that the * dwelling was the main residence of an individual who: (a) owned the dwelling; and (b) was an * excluded foreign resident; just before the individual’s death.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-210 — Trustee acquiring dwelling under will

(1) This section applies if you are the trustee of a deceased estate and, under the deceased’s will, you * acquire an * ownership interest in a * dwelling for occupation by an individual. (2) If a * CGT event happens to the interest in relation to the individual and you receive no money or property for it: (a) a * capital gain or * capital loss you make from the event is disregarded; and (b) the first element of the * dwelling’s * cost base and * reduced cost base in the hands of the individual is its cost base and reduced cost base in your hands at the time of the event; and (c) the individual is taken to have * acquired it when you did. (3) If: (a) you receive money or property for the * CGT event happening or the event happens in relation to another entity; and (b) the dwelling was the main residence of the individual from the time you * acquired the interest until the time of the event; you do not make a * capital gain or * capital loss from the CGT event. (4) However, if the * dwelling was the main residence of the individual during part only of that period, you make a * capital gain or * capital loss worked out using the formula: where: CG or CL amount is the * capital gain or * capital loss you would have made from the * CGT event apart from this Subdivision. non ‑ main residence days is the number of days in that period when the * dwelling was not the individual’s main residence. (5) Only these * CGT events are relevant: (a) CGT events A1, B1, C1, C2, E1, E2, E5, F2, K3, K4 and K6 (except one involving the forfeiting of a deposit); and (b) a CGT event that involves the forfeiting of a deposit as part of an uninterrupted sequence of transactions ending in one of the events specified in paragraph (a) subsequently happening. Note: The full list of CGT events is in section 104 ‑ 5. (6) However, this section does not apply if, just before the deceased’s death, the deceased was an * excluded foreign resident.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 173 of 2000, effective s 4, Sch 1, Sch 3 (items 1–15, 17), Sch 4 (items 6–45, 47–49, 51–59, 65(1), (3)) and Sch 6: 21 Dec 2000 (s 2(1)) Sch 4 (items 46, 50): 1 July 1998 (s 2(3)) Sch 5: 31 May 2000 (s 2(4)) | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-215 — What the following provisions are about

The trustee of a trust that is or has been a special disability trust may be eligible for an exemption to the extent that a dwelling is the main residence of the individual who is or has been the principal beneficiary of the trust. Another beneficiary of the trust may be eligible for an exemption if the dwelling is distributed to that other beneficiary at or after the principal beneficiary’s death. Note 1: The following provisions also apply to the exemption about compulsory acquisitions of adjacent land (see section 118 ‑ 245). Note 2: The exemptions may not apply if the principal beneficiary of the trust is a foreign resident.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-218 — Exemption available to trustee—main case

(1) This section applies to you in relation to a * CGT event if: (a) the CGT event happens in relation to a * CGT asset; and (b) just before the CGT event happens, you hold the CGT asset as trustee of a trust; and (c) the trust was a * special disability trust on at least one of the days on which you held the CGT asset. Note: This section may not apply if the principal beneficiary of the trust is a foreign resident (see subsection (5)). (2) For the purposes of applying this Subdivision in relation to the * CGT event, on each day to which paragraph (1)(c) applies: (a) treat yourself as holding the * CGT asset personally (and not as trustee of the trust); and (b) if the * principal beneficiary of the trust uses the applicable * dwelling in a particular way on that day—treat yourself as using the dwelling in that way on that day. Example: If the principal beneficiary uses the dwelling as his or her main residence on the day, then treat yourself as using the dwelling as your main residence on that day. Note 1: The CGT asset need not be a dwelling (or an ownership interest in a dwelling) if it is land adjacent to a dwelling, an adjacent structure of a flat or home unit, or an ownership interest in such an asset. Note 2: If the trustee is an individual, the individual’s actual circumstances are ignored. Similarly, this subsection does not affect how this Subdivision applies for the individual’s actual circumstances. See section 960 ‑ 100. (3) If you are not an individual, treat yourself as being an individual for the purposes of applying this Subdivision in relation to the * CGT event. (4) If the * CGT asset, or your * ownership interest in it, * passed to you as a beneficiary in a deceased estate: (a) treat the deceased as never having used the applicable * dwelling for the * purpose of producing assessable income; and (b) treat the dwelling as being the deceased’s main residence on each day during the deceased’s * ownership period; for the purposes of applying this Subdivision in relation to the * CGT event. (5) Despite subsection (1), this section does not apply if, at the time the * CGT event happens, the * principal beneficiary of the trust: (a) is an * excluded foreign resident; or (b) is a foreign resident who does not satisfy the * life events test.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-220 — Exemption available to trustee—after the principal beneficiary’s death

This section applies to you in relation to a * CGT event if: (a) the trustee of a trust holds a * CGT asset on a particular day (the transition day ); and (b) on the transition day, or on an earlier day on which the CGT asset was held by the trustee of the trust, the trust is a * special disability trust; and (c) the individual who is or has been the * principal beneficiary of the trust dies on the transition day; and (d) the CGT event happens in relation to the CGT asset at or after the deceased’s death; and (e) the CGT event happens while you hold the CGT asset: (i) as trustee of the trust; or (ii) as trustee of an implied trust arising because of the deceased’s death.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 118-222 — Exemption available to other beneficiary who acquires the CGT asset after the principal beneficiary’s death

This section applies to you in relation to a * CGT event if: (a) the CGT event happens in relation to a * CGT asset; and (b) you * acquired the CGT asset or your * ownership interest in it: (i) as a result of an earlier CGT event; and (ii) as a beneficiary of a trust; and (c) section 118 ‑ 220 applied to the trustee of the trust in relation to the earlier CGT event and the CGT asset.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 118-225 — Amount of exemption available after the principal beneficiary’s death—general

Full exemption for trustee unless sells asset for proceeds etc. (1) A * capital gain or * capital loss you make from a * CGT event is disregarded if: (a) section 118 ‑ 220 applies to you in relation to the CGT event; and (b) as a result of the CGT event, an entity * acquires the * CGT asset: (i) as trustee of an implied trust arising because of the deceased’s death; or (ii) as a beneficiary of the relevant trust referred to in paragraph 118 ‑ 220(e). Exemption for beneficiary, or trustee selling asset for proceeds etc. (2) If: (a) section 118 ‑ 220 applies to you in relation to a * CGT event, but paragraph (1)(b) does not; or (b) section 118 ‑ 222 applies to you in relation to a CGT event; the amount of the * capital gain or * capital loss that you would have made apart from this section from the CGT event is decreased by an amount that is reasonable. (3) In determining what is a reasonable decrease: (a) if section 118 ‑ 220 applies to you, but paragraph (1)(b) does not—treat yourself as being an individual who owned the * CGT asset as the trustee of the deceased’s estate; and (b) if section 118 ‑ 222 applies to you—treat yourself as being an individual and treat the CGT asset or your * ownership interest in it as having * passed to you as a beneficiary in the deceased’s estate; and (c) have regard to the principles in this Subdivision, and to: (i) the extent that the applicable * dwelling was the deceased’s main residence for the relevant period; and (ii) the extent that the dwelling was used for the * purpose of producing assessable income during the relevant period. (4) For the purposes of subparagraph (3)(c)(i), assume the * dwelling was not the deceased’s main residence on each day the trust referred to in paragraph 118 ‑ 220(b) was not a * special disability trust. (5) However, subsection (2) does not apply if, just before the deceased’s death, the deceased was an * excluded foreign resident.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-227 — Amount of exemption available after the principal beneficiary’s death—cost base and reduced cost base

(1) If section 118 ‑ 220 applies to you and: (a) the applicable * dwelling was the deceased’s main residence just before the deceased’s death; and (b) that dwelling was not then being used for the * purpose of producing assessable income; and (c) the trust referred to in paragraph 118 ‑ 220(b) was then a * special disability trust; and (ca) the deceased was not an * excluded foreign resident just before the deceased’s death; then: (d) the first element of the * CGT asset’s * cost base, in your hands, is the CGT asset’s * market value just before the deceased’s death; and (e) the first element of the CGT asset’s * reduced cost base, in your hands, is worked out similarly. (2) However, if section 118 ‑ 220 applies to you as trustee of an implied trust arising because of the deceased’s death, but subsection (1) does not, then: (a) the first element of the * CGT asset’s * cost base, in your hands, is the CGT asset’s cost base just before the deceased’s death; and (b) the first element of the CGT asset’s * reduced cost base, in your hands, is worked out similarly. (3) If section 118 ‑ 222 applies to you: (a) the first element of the * CGT asset’s * cost base, in your hands, is the CGT asset’s cost base just before the earlier * CGT event happened that resulted in you * acquiring the CGT asset or your * ownership interest in it; and (b) the first element of the CGT asset’s * reduced cost base, in your hands, is worked out similarly.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-230 — Application of CGT events E5 and E7 in relation to main residence exemption and special disability trusts

If * CGT event E5 or E7 happens in relation to a * CGT asset held by a trust that is or has been a * special disability trust, treat the lists of CGT events in paragraphs 118 ‑ 110(2)(a) and 118 ‑ 195(2)(a) as including a reference to that CGT event.

Amendment history: Inserted by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 118-240 — What the following provisions are about

You can ignore a capital gain or capital loss you make from a compulsory acquisition (or similar arrangement) that happens only to land that is adjacent to: (a) a dwelling that is your main residence; or (b) a dwelling that passed to you as a beneficiary, or trustee, of a deceased estate; to the extent that the land was used primarily for private or domestic purposes in association with the dwelling. There is a limit on the maximum area of land covered by the exemption. Note 1: The exemption may not apply in full if the dwelling: (a) was not always a main residence; or (b) was used for the purpose of producing assessable income. Note 2: The exemption may not apply at all if you are a foreign resident.

Amendment history: Inserted by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-245 — CGT events happening only to adjacent land

Total adjacent land is 2 hectares or less (1) A * capital gain or * capital loss you make from a * CGT event that happens in relation to land (the exempt land ), or your * ownership interest in it, is disregarded if: (a) you are an individual; and (b) the exempt land is all or part of a * dwelling’s * adjacent land at the time of the CGT event; and (c) the CGT event does not happen in relation to the dwelling and does not happen in relation to your ownership interest in the dwelling; and (d) one of the following subparagraphs applies: (i) the dwelling was your main residence throughout all or part of your * ownership period of the dwelling; (ii) your ownership interest in the dwelling * passed to you as a beneficiary in a deceased estate; (iii) you own your ownership interest in the dwelling as the trustee of a deceased estate; and (e) section 118 ‑ 250 (about compulsory acquisitions of adjacent land) applies to the CGT event and the exempt land; and (f) the sum of the following is 2 hectares or less: (i) the area of all of the dwelling’s adjacent land at the time of the CGT event; (ii) the area of the land immediately under the dwelling; (iii) if this section applied to you for an earlier CGT event that involved reducing the area of the dwelling’s adjacent land at the time of that earlier CGT event—that reduction in area. Note: You may get only a partial exemption for the gain or loss (see section 118 ‑ 260). Total adjacent land is more than 2 hectares (2) If: (a) apart from paragraph (1)(f), subsection (1) would apply to the gain or loss; and (b) you choose this subsection to apply to the gain or loss; disregard so much of the gain or loss that relates to land (the exempt land ) within the * maximum exempt area for the * CGT event and the * dwelling. Note: You may get only a partial exemption for this portion of the gain or loss (see section 118 ‑ 260). No exemption if you are an excluded foreign resident (3) However, this section does not apply if, at the time the * CGT event happens, you: (a) are an * excluded foreign resident; or (b) are a foreign resident who does not satisfy the * life events test.

Amendment history: Inserted by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent | Amended by No 129 of 2019, effective Sch 1 (items 1–31, 33–36) and Sch 2: 1 Jan 2020 (s 2(1) item 2)

s 118-250 — Compulsory acquisitions of adjacent land

(1) This section applies to the * CGT event and the exempt land if the CGT event involves: (a) the compulsory * acquisition of the exempt land by: (i) an * Australian government agency; or (ii) an entity under a power conferred by an * Australian law; or (b) you * disposing of the exempt land to an entity in circumstances meeting all of these conditions: (i) the disposal takes place after a notice was served on you by or on behalf of the entity; (ii) the notice invited you to negotiate with the entity with a view to the entity acquiring the exempt land by agreement; (iii) the notice informed you that if the negotiations were unsuccessful, the exempt land would be compulsorily acquired by the entity; (iv) the compulsory acquisition would have been under a power of compulsory acquisition conferred by an Australian law. Note: For paragraph (b), the entity may be an Australian government agency. (2) This section applies to the * CGT event and the exempt land if the CGT event involves: (a) your * ownership interest in the exempt land being compulsorily cancelled (however described) or varied (however described) by: (i) an * Australian government agency; or (ii) an entity under a power conferred by an * Australian law; or (b) you surrendering (however described) or varying (however described) your ownership interest in the exempt land in circumstances meeting all of these conditions: (i) the surrender or variation takes place after a notice was served on you by or on behalf of an entity; (ii) the notice invited you to negotiate with the entity with a view to you agreeing to surrender or vary your ownership interest; (iii) the notice informed you that if the negotiations were unsuccessful, your ownership interest would be compulsorily cancelled, or varied, under a power conferred by an Australian law. Note: For paragraph (b), the entity may be an Australian government agency. (3) This section applies to the * CGT event and the exempt land if the CGT event involves: (a) an interest or right in or relating to the exempt land being compulsorily conferred on: (i) an * Australian government agency; or (ii) an entity under a power conferred by an * Australian law; or (b) you conferring on an entity an interest or right in or relating to the exempt land in circumstances meeting all of these conditions: (i) the conferral takes place after a notice was served on you by or on behalf of an entity; (ii) the notice invited you to negotiate with the entity with a view to you agreeing to confer an interest or right in or relating to the exempt land; (iii) the notice informed you that if the negotiations were unsuccessful, an interest or right in or relating to the exempt land would be compulsorily conferred on the entity under a power conferred by an Australian law. Note: For paragraph (b), the entity may be an Australian government agency. (4) This section applies to the * CGT event and the exempt land if: (a) your * ownership interest in the exempt land: (i) was conferred on you by an * Australian government agency; and (ii) had a limited, but renewable, period of operation; and (b) the CGT event involves that ownership interest not being renewed by that agency.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Amended by No 114 of 2000, effective Schedule 4 (items 43, 44): 1 July 1998 Remainder: Royal Assent | Inserted by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 118-255 — Maximum exempt area

Your maximum exempt area for the * CGT event and the * dwelling is 2 hectares less the amount worked out as follows: Method statement Step 1. Identify each earlier * CGT event (if any) that: (a) happened in relation to land that was part of the * dwelling’s * adjacent land at the time of the earlier CGT event, or happened in relation to your * ownership interest in that land at that time; and (b) resulted in you losing rights to the substantial use and enjoyment of that land either completely or for at least 10 years; for which you made a * capital gain or * capital loss that was wholly or partly disregarded because of the application of subsection 118 ‑ 245(2). Step 2. For each earlier * CGT event covered by step 1, work out the area of the exempt land for that application of subsection 118 ‑ 245(2). Step 3. Add the results from step 2 to the area of the land immediately under the * dwelling.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Amended by No 114 of 2000, effective Schedule 4 (items 43, 44): 1 July 1998 Remainder: Royal Assent | Inserted by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 118-260 — Partial exemption rules

(1) If section 118 ‑ 245 applies to a * CGT event, the amount of the * capital gain or * capital loss that you would have made apart from this section from the CGT event is increased by an amount that is reasonable having regard to the following: (a) the extent that the * dwelling was not a main residence for the relevant period; (b) the extent that the dwelling was used for the * purpose of producing assessable income during the relevant period. (2) In determining what is a reasonable increase, have regard to the principles in this Subdivision applicable to * CGT events happening in relation to a * dwelling or your * ownership interest in it.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 118-265 — Extension to adjacent structures

Sections 118 ‑ 245 to 118 ‑ 260 (with appropriate modifications) apply to an * adjacent structure of a flat or home unit in a corresponding way to the way they apply to a * dwelling’s * adjacent land.

Amendment history: Inserted by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 118-300 — Insurance policies

(1) A * capital gain or * capital loss you make from a * CGT event happening in relation to a * CGT asset that is your interest in rights under a * general insurance policy, a * life insurance policy or an * annuity instrument is disregarded in the situations set out in this table. Insurance policies Item The * CGT event happens to this type of policy: ... and you are 1 Any insurance policy or * annuity instrument the insurer or the entity that issued the instrument 2 A * general insurance policy for property where, if a * CGT event happened in relation to the property, any * capital gain or * capital loss would be disregarded the insured 3 A policy of insurance on the life of an individual or an * annuity instrument the original owner of the policy or instrument (other than the trustee of a * complying superannuation entity) 4 A policy of insurance on the life of an individual or an * annuity instrument an entity that * acquired the interest in the policy or instrument for no consideration 5 A policy of insurance on the life of an individual or an * annuity instrument the trustee of a * complying superannuation entity for the income year in which the * CGT event happened 6 A policy of insurance on the life of an individual or an * annuity instrument, where the * life insurance company’s liabilities under the policy or instrument are to be discharged out of * complying superannuation assets or * segregated exempt assets the life insurance company 7 A policy of insurance against an individual suffering an illness or injury the trustee of a * complying superannuation entity for the income year in which the * CGT event happened Example 1: Brian (as the insured) receives an insurance payment from his insurer for the destruction of a building he owned as an investment. The payment constitutes capital proceeds on the destruction (CGT event C1). The discharge of the insurance policy (CGT event C2) has no CGT consequences. Example 2: Peter is the original beneficial owner of the rights under a policy of insurance on the life of an individual. He transfers the rights to his spouse for nothing. There are no CGT consequences for him, and none for his spouse if he dies. Payment to trust beneficiary (or representative) if trustee owns the policy or instrument (1A) A * capital gain or * capital loss you make from a * CGT event happening because you receive a * CGT asset from the trustee of a trust is disregarded if: (a) you receive the CGT asset as: (i) a beneficiary of the trust; or (ii) a * legal personal representative of a beneficiary of the trust; and (b) the CGT asset is attributable to another CGT event and CGT asset to which table item 3 in subsection (1) applies for the trustee. (2) Only these * CGT events are relevant: CGT events A1, B1, C2, E1, E2, E3, E5, E6, E7, E8, I1, I2, K3 and K4. Note: The full list of CGT events is in section 104 ‑ 5.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 169 of 1999, effective Sch 5 (items 1–12): 22 Feb 1999 (s 2(2)) Sch 1 (items 1–13, 18), Sch 2 (items 1–3, 5), Sch 3 (items 1–4, 7), Sch 4 (items 1–15, 19), Sch 6, Sch 7 (item 11), Sch 8, Sch 9 (items 1–14, 23–33) and Sch 10: 10 Dec 1999 (s 2(1)) | Amended by No 89 of 2000, effective s 4, Sch 1 (items 1–17, 19–25, 30–32, 34–65, 65A, 68), Sch 2 (items 63–66, 69, 71–79, 79A, 79B, 80–83, 83A, 84), Sch 4, Sch 5 (items 1–31, 34), Sch 6 and Sch 9 (items 5, 9, 26, 43, 55–57, 62, 63, 66, 67): 30 June 2000 (s 2(1)) Sch 1 (item 18): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 1 (items 26–29, 33): 31 May 2000 (s 2(3)) Sch 2 (items 67, 68, 70): 1 July 2001 (s 2(5)) Sch 9 (items 1–4, 6–8, 10–25, 27–42, 44–54, 58–61, 64, 65, 68–73): 1 July 2000 (s 2(11)) | Amended by No 45 of 2008, effective 26 June 2008 | Amended by No 21 of 2015, effective s 4 and Sch 6 (items 1, 2, 16–25, 73): 19 Mar 2015 (s 2(1) items 1, 7–11, 13) Sch 1 (items 1–17, 49), Sch 3 and Sch 7 (items 13–21): 20 Mar 2015 (s 2(1) items 2, 4, 15) Sch 4 (items 1–5, 9–17): 1 July 2015 (s 2(1) item 5) Sch 6 (items 51–59, 74–79): never commences (s 2(1) items 12, 14) | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 118-305 — Superannuation

(1) A * capital gain or * capital loss is disregarded if you make it from a * CGT event happening in relation to any of the following: (a) a right to an allowance, annuity or capital amount payable out of a * superannuation fund or * approved deposit fund; (b) a right to an asset of such a fund; (c) a right to any part of such an allowance, annuity, capital amount or asset. Example: Angela retires from her employment and receives a lump sum payment from her superannuation fund. This is an example of CGT event C2 (her rights to receive the payment ending). There are no CGT consequences for Angela. (2) However, this exemption is not available if: (a) you are the trustee of the fund and a * CGT event happens in relation to a * CGT asset of the fund; or (b) an entity receives a payment or property where: (i) the entity was not a member of the fund; and (ii) the entity * acquired the right to the payment or property for consideration. (3) Subsection (2) does not apply if: (a) a * payment split applies to a * splittable payment; and (b) as a result, a payment is made to the * non ‑ member spouse (or to his or her * legal personal representative if the non ‑ member spouse has died).

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 114 of 2001, effective Sch 1 (items 16–19, 21–24): 28 Dec 2002 (s 2)

s 118-310 — RSA’s

A * capital gain or * capital loss you make from a * CGT event happening in relation to a right to, or any part of, an * RSA is disregarded.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4))

s 118-313 — Superannuation agreements under the Family Law Act

A * capital gain or * capital loss you make from * CGT event C2 or D1 relating directly to any of the following is disregarded: (a) the making of a superannuation agreement (within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975 ); (b) the termination, or setting aside, of such an agreement; (c) such an agreement otherwise coming to an end.

Amendment history: Inserted by No 114 of 2001, effective Sch 1 (items 16–19, 21–24): 28 Dec 2002 (s 2) | Inserted by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 112 of 2020, effective Sch 3 (items 39–47): 28 Sept 2022 (s 2(1) item 1)

s 118-315 — Segregated exempt assets of life insurance companies

A * capital gain or * capital loss that a * life insurance company makes from a * CGT event happening in relation to a * segregated exempt asset is disregarded.

Amendment history: Inserted by No 89 of 2000, effective s 4, Sch 1 (items 1–17, 19–25, 30–32, 34–65, 65A, 68), Sch 2 (items 63–66, 69, 71–79, 79A, 79B, 80–83, 83A, 84), Sch 4, Sch 5 (items 1–31, 34), Sch 6 and Sch 9 (items 5, 9, 26, 43, 55–57, 62, 63, 66, 67): 30 June 2000 (s 2(1)) Sch 1 (item 18): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 1 (items 26–29, 33): 31 May 2000 (s 2(3)) Sch 2 (items 67, 68, 70): 1 July 2001 (s 2(5)) Sch 9 (items 1–4, 6–8, 10–25, 27–42, 44–54, 58–61, 64, 65, 68–73): 1 July 2000 (s 2(11))

s 118-320 — Segregated current pension assets of a complying superannuation entity

(1) A * capital gain or * capital loss that a * complying superannuation entity makes from a * CGT event happening in relation to a * segregated current pension asset is disregarded. (2) However, subsection (1) does not apply to a * capital gain if the capital gain would, if it were an amount of * ordinary income or * statutory income received by the * complying superannuation fund, be * non ‑ arm’s length income.

Amendment history: Inserted by No 89 of 2000, effective s 4, Sch 1 (items 1–17, 19–25, 30–32, 34–65, 65A, 68), Sch 2 (items 63–66, 69, 71–79, 79A, 79B, 80–83, 83A, 84), Sch 4, Sch 5 (items 1–31, 34), Sch 6 and Sch 9 (items 5, 9, 26, 43, 55–57, 62, 63, 66, 67): 30 June 2000 (s 2(1)) Sch 1 (item 18): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 1 (items 26–29, 33): 31 May 2000 (s 2(3)) Sch 2 (items 67, 68, 70): 1 July 2001 (s 2(5)) Sch 9 (items 1–4, 6–8, 10–25, 27–42, 44–54, 58–61, 64, 65, 68–73): 1 July 2000 (s 2(11)) | Amended by No 15 of 2007, effective s 4, Sch 1 (items 150–236, 240, 242–260, 406(1)–(3)), Sch 3 (items 8–44, 66) and Sch 4 (items 1–8): 15 Mar 2007 (s 2(1) items 1, 2, 6, 8, 9) Sch 2: 12 Apr 2007 (s 2(1) item 3) | Amended by No 141 of 2020, effective Sch 1 (item 1) and Sch 4 (items 82–101): 1 Jan 2021 (s 2(1) items 2, 7) Sch 4 (item 146): 18 Dec 2020 (s 2(1) item 16)

s 118-350 — Units in pooled superannuation trusts

(1) A * capital gain or * capital loss an entity makes from a * CGT event happening in relation to a unit in a unit trust is disregarded if: (a) the trust is a * pooled superannuation trust for the income year in which the event happened; and (b) one of the conditions in subsection (2) is satisfied. (2) The entity must be: (a) the trustee of a * complying superannuation entity for the income year in which the * CGT event happened; or (b) a * life insurance company and, just before the event happened, the unit must have been a * complying superannuation asset or a * segregated exempt asset of the company.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 169 of 1999, effective Sch 5 (items 1–12): 22 Feb 1999 (s 2(2)) Sch 1 (items 1–13, 18), Sch 2 (items 1–3, 5), Sch 3 (items 1–4, 7), Sch 4 (items 1–15, 19), Sch 6, Sch 7 (item 11), Sch 8, Sch 9 (items 1–14, 23–33) and Sch 10: 10 Dec 1999 (s 2(1)) | Amended by No 89 of 2000, effective s 4, Sch 1 (items 1–17, 19–25, 30–32, 34–65, 65A, 68), Sch 2 (items 63–66, 69, 71–79, 79A, 79B, 80–83, 83A, 84), Sch 4, Sch 5 (items 1–31, 34), Sch 6 and Sch 9 (items 5, 9, 26, 43, 55–57, 62, 63, 66, 67): 30 June 2000 (s 2(1)) Sch 1 (item 18): 1 pm (A.C.T.) 11 Nov 1999 (s 2(2)) Sch 1 (items 26–29, 33): 31 May 2000 (s 2(3)) Sch 2 (items 67, 68, 70): 1 July 2001 (s 2(5)) Sch 9 (items 1–4, 6–8, 10–25, 27–42, 44–54, 58–61, 64, 65, 68–73): 1 July 2000 (s 2(11)) | Amended by No 45 of 2008, effective 26 June 2008 | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 118-400 — What this Subdivision is about

You can ignore capital gains and capital losses from CGT events that relate to investments, in Australian companies and unit trusts (and in some cases foreign holding companies), that meet the requirements of this Subdivision. These investments are made: (a) through limited partnerships, known as venture capital limited partnerships or early stage venture capital limited partnerships, that are unconditionally registered under Part 2 of the Venture Capital Act 2002 ; or (b) through limited partnerships, known as Australian venture capital funds of funds, that are unconditionally registered under that Part; or (c) directly by foreign residents who are registered under Part 3 of that Act. However, unless investments are made through early stage venture capital limited partnerships, you must be a foreign resident for this Subdivision to apply. Note: Registration of a limited partnership under Part 2 of that Act also leads to its income and losses being assessed under Division 5 of Part III of the Income Tax Assessment Act 1936 on the basis that it is a partnership. This is an exception to the general rule, under Division 5A of that Part, that limited partnerships are assessed as companies. Table of sections Operative provisions 118 ‑ 405 Exemption for certain foreign venture capital investments through venture capital limited partnerships 118 ‑ 407 Exemption for certain venture capital investments through early stage venture capital limited partnerships 118 ‑ 408 Partial exemption for some capital gains otherwise fully exempt under section 118 ‑ 407 118 ‑ 410 Exemption for certain foreign venture capital investments through Australian venture capital funds of funds 118 ‑ 415 Exemption for certain venture capital investments by foreign residents 118 ‑ 420 Meaning of eligible venture capital partner etc. 118 ‑ 425 Meaning of eligible venture capital investment —investments in companies 118 ‑ 427 Meaning of eligible venture capital investment —investments in unit trusts 118 ‑ 428 Additional investment requirements for ESVCLPs 118 ‑ 430 Meaning of at risk 118 ‑ 432 Findings of substantially novel applications of technology 118 ‑ 435 Special rule relating to investment in foreign resident holding companies 118 ‑ 440 Meaning of permitted entity value 118 ‑ 445 Meaning of committed capital 118 ‑ 450 Values of assets and investments of entities without auditors 118 ‑ 455 Impact Assessment of this Subdivision

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent

s 118-405 — Exemption for certain foreign venture capital investments through venture capital limited partnerships

General (1) All of your share in a * capital gain or a * capital loss from a * CGT event is disregarded if: (a) you are an * eligible venture capital partner in a * limited partnership; and (b) the CGT event relates to an investment that the partnership made that is an * eligible venture capital investment; and (c) when the partnership made the investment, the partnership was a * venture capital limited partnership that was * unconditionally registered; and (d) at the time of the CGT event, the partnership: (i) owned the investment; and (ii) had owned the investment for at least 12 months; and (iii) was a venture capital limited partnership that was unconditionally registered; and (iv) in the case of a capital gain—met all of the * registration requirements of a VCLP that are not * investment registration requirements. Note: The registration requirements of a VCLP are set out in section 9 ‑ 1 of the Venture Capital Act 2002 . It is important to understand that this is a separate requirement from registration under Part 2 of that Act (which effectively determines whether an entity is a VCLP). It is technically possible to be registered under Part 2 of that Act without meeting the registration requirements of a VCLP, but you might still not be entitled to exemption under this section. Meaning of venture capital limited partnership (2) A * limited partnership is a venture capital limited partnership at a particular time if, at that time, the partnership’s registration as a venture capital limited partnership under Part 2 of the Venture Capital Act 2002 is, or is taken to have been, in force. For when the registration is, or is taken to have been, in force, see section 13 ‑ 10 of the Venture Capital Act 2002 . Note: In this Act and the Venture Capital Act 2002 , the term “venture capital limited partnership” is usually abbreviated to “VCLP”. Effect of converting convertible notes etc. (3) A partnership that acquired a * share in a company by converting a * convertible note, or a convertible preference share, issued by the company is treated, for the purposes of subparagraph (1)(d)(ii), as having owned the share from the time when it last acquired the convertible note or convertible preference share. (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.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent

s 118-407 — Exemption for certain venture capital investments through early stage venture capital limited partnerships

General (1) All of your share in a * capital gain or a * capital loss from a * CGT event is disregarded if: (a) you are a partner in a * limited partnership; and (b) the CGT event relates to an investment that the partnership made that: (i) is an * eligible venture capital investment; and (ii) meets all of the * additional investment requirements for ESVCLPs for the investment; and (c) when the partnership made the investment, the partnership was an * early stage venture capital limited partnership that was * unconditionally registered; and (d) at the time of the CGT event, the partnership: (i) owned the investment; and (ii) had owned the investment for at least 12 months; and (iii) was an early stage venture capital limited partnership that was unconditionally registered; and (iv) in the case of a capital gain—met all of the * registration requirements of an ESVCLP that are not * investment registration requirements. Note 1: The registration requirements of an ESVCLP are set out in section 9 ‑ 3 of the Venture Capital Act 2002 . It is important to understand that this is a separate requirement from registration under Part 2 of that Act (which effectively determines whether an entity is an ESVCLP). It is technically possible to be registered under Part 2 of that Act without meeting the registration requirements of an ESVCLP, but you might still not be entitled to exemption under this section. Note 2: This section does not apply if you get a partial exemption in relation to a CGT event under section 118 ‑ 408. Residency requirements for general partners (2) However, if you are a * general partner in the partnership, subsection (1) does not apply to you unless you are: (a) an Australian resident; or (b) a resident of 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. (3) For the purposes of this section, the place of residence of a * general partner in a * limited partnership: (a) that is a company or limited partnership; and (b) that is not an Australian resident; is the place in which the general partner has its central management and control. Meaning of early stage venture capital limited partnership (4) A * limited partnership is an early stage venture capital limited partnership at a particular time if, at that time, the partnership’s registration as an early stage venture capital limited partnership under Part 2 of the Venture Capital Act 2002 is, or is taken to have been, in force. Note 1: For when the registration is, or is taken to have been, in force, see section 13 ‑ 10 of the Venture Capital Act 2002 . Note 2: In this Act and the Venture Capital Act 2002 , the term “early stage venture capital limited partnership” is usually abbreviated to “ESVCLP”. Effect of converting convertible notes etc. (6) A partnership that acquired a * share in a company by converting a * convertible note, or a convertible preference share, issued by the company is treated, for the purposes of subparagraph (1)(d)(ii), as having owned the share from the time when it last acquired the convertible note or convertible preference share. (7) A partnership that acquired a unit in a unit trust by converting a * convertible note issued by 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. (8) Subsection (6) or (7) applies whether or not the acquisition of the * convertible note, or convertible preference share, was an * eligible venture capital investment. (9) 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.

Amendment history: Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 173 of 2000, effective s 4, Sch 1, Sch 3 (items 1–15, 17), Sch 4 (items 6–45, 47–49, 51–59, 65(1), (3)) and Sch 6: 21 Dec 2000 (s 2(1)) Sch 4 (items 46, 50): 1 July 1998 (s 2(3)) Sch 5: 31 May 2000 (s 2(4)) | Inserted by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 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: 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.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3)

s 118-410 — Exemption for certain foreign venture capital investments through Australian venture capital funds of funds

Gains or losses as a partner in a VCLP or an ESVCLP (1) All of your share in a * capital gain or a * capital loss from a * CGT event is disregarded if: (a) you are an * eligible venture capital partner in a * limited partnership; and (b) the CGT event relates to an * eligible venture capital investment made by a * VCLP, or an * ESVCLP, in which the partnership is a partner; and (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 (e) at the time of the CGT event, the partnership: (i) was an Australian venture capital fund of funds that was unconditionally registered; and (ii) in the case of a capital gain—met all of the * registration requirements of an AFOF that are not * investment registration requirements; and (f) at the time of the CGT event, the VCLP or ESVCLP: (i) owned the investment; and (ii) had owned the investment for at least 12 months; and (iii) was unconditionally registered; and (iv) in the case of a capital gain—met all of the * registration requirements of a VCLP, or all of the * registration requirements of an ESVCLP, (as the case requires) that are not investment registration requirements. Note: The registration requirements of an AFOF are set out in section 9 ‑ 5 of the Venture Capital Act 2002 . It is important to understand that this is a separate requirement from registration under Part 2 of that Act (which effectively determines whether an entity is an AFOF). It is technically possible to be registered under Part 2 of that Act without meeting the registration requirements of an AFOF, but you might still not be entitled to exemption under this section. Gains or losses from direct investments (2) All of your share in a * capital gain or a * capital loss from a * CGT event is disregarded if: (a) you are an * eligible venture capital partner in a * limited partnership; and (b) in the case of a capital gain—the CGT event relates to an * eligible venture capital investment that the partnership made in a company, or a unit trust, in which a * VCLP, or an * ESVCLP, of which the partnership is a partner, owns one or more eligible venture capital investments; and (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 owned one or more eligible venture capital investments in the company referred to in paragraph (b); and (e) at the time of the CGT event, the partnership: (i) owned the investment; and (ii) had owned the investment for at least 12 months; and (iii) was an Australian venture capital fund of funds that was unconditionally registered; and (iv) in the case of a capital gain—met all of the * registration requirements of an AFOF that are not * investment registration requirements. Note: The registration requirements of an AFOF are set out in section 9 ‑ 5 of the Venture Capital Act 2002 . It is important to understand that this is a separate requirement from registration under Part 2 of that Act (which effectively determines whether an entity is an AFOF). It is technically possible to be registered under Part 2 of that Act without meeting the registration requirements of an AFOF, but you might still not be entitled to exemption under this section. Meaning of Australian venture capital fund of funds (3) A * limited partnership is an Australian venture capital fund of funds at a particular time if, at that time, the partnership’s registration as an Australian venture capital fund of funds under Part 2 of the Venture Capital Act 2002 is, or is taken to have been, in force. For when the registration is, or is taken to have been, in force, see section 13 ‑ 10 of the Venture Capital Act 2002 . Note: In this Act and the Venture Capital Act 2002 , the term “Australian venture capital fund of funds” is usually abbreviated to “AFOF”. Effect of converting convertible notes etc. (4) A partnership that acquired a * share in a company by converting a * convertible note, or a convertible preference share, issued by the company is treated, for the purposes of subparagraphs (1)(f)(ii) and (2)(e)(ii), as having owned the share from the time when it last acquired the convertible note or convertible preference share. (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.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 105 of 2004, effective Schedule 2: 1 Apr 2004 Remainder: Royal Assent | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent

s 118-415 — Exemption for certain venture capital investments by foreign residents

General (1) A * capital gain or a * capital loss from a * CGT event is disregarded if: (a) the CGT event relates to an investment that you made that is an * eligible venture capital investment; and (b) you were an * eligible venture capital investor when you made the investment; and (c) at the time of the CGT event: (i) you owned the investment; and (ii) you had owned the investment for at least 12 months; and (iii) you were an eligible venture capital investor. Meaning of eligible venture capital investor (2) An entity is an eligible venture capital investor at a particular time if, at that time, the entity: (a) is a * tax ‑ exempt foreign resident; and (b) is registered under Part 3 of the Venture Capital Act 2002 . Effect of converting convertible notes etc. (3) An entity that acquired a * share in a company by converting a * convertible note, or a convertible preference share, issued by the company is treated, for the purposes of subparagraph (1)(c)(ii), as having owned the share from the time when it last acquired the convertible note or convertible preference share. (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.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent

s 118-420 — Meaning of eligible venture capital partner etc.

(1) A partner in a * limited partnership is an eligible venture capital partner if: (a) the partner is a * tax ‑ exempt foreign resident; or (b) the partner is a * foreign venture capital fund of funds, and the sum of: (i) the partner’s * committed capital in the partnership; and (ii) the sum of the amounts of committed capital in the partnership of any entities that are * connected entities of the partner; does not exceed 30% of the partnership’s committed capital; or (ba) the partner is a * widely held foreign venture capital fund of funds; or (c) the partner 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, and the sum of: (i) the partner’s committed capital in the partnership; and (ii) the sum of the amounts of committed capital in the partnership of any entities that are connected entities of the partner; is less than 10% of the partnership’s committed capital. Note: Subsection (7) prevents some trusts from being eligible venture capital partners. (2) An entity that is an * associate of the partner only because the entity is a partner in the partnership in question is taken not to be a * connected entity of the partner for the purposes of subparagraphs (1)(b)(ii) and (c)(ii). (3) An entity is a tax ‑ exempt foreign resident if: (a) the entity is a foreign resident; and (b) the entity is not a * general partner of a * VCLP or an * ESVCLP; and (c) the entity’s income is exempt, or effectively exempt, from taxation in the entity’s country of residence. (4) An entity that is a * limited partnership is a foreign venture capital fund of funds if: (a) the partnership was established in a foreign country; and (b) every partner who is a * general partner is a foreign resident; and (c) the partnership is not a general partner of a * VCLP or an * ESVCLP. (5) An entity that is not a * limited partnership is a foreign venture capital fund of funds if: (a) whether by operation of law or by election, the entity is not taxed as an entity in its country of residence, but the entity’s income is taxed to its members according to their interests in the entity; and (b) the entity was established in a foreign country; and (c) the entity is a foreign resident; and (d) the entity is not a * general partner of a * VCLP or an * ESVCLP. (6) An entity is a widely held foreign venture capital fund of funds if: (a) the entity is a * foreign venture capital fund of funds; and (b) the entity is a * widely held entity; and (c) * eligible venture capital partners (other than foreign venture capital fund of funds) ultimately hold the rights to at least 90% of the entity’s income; and (d) each other entity who: (i) if the entity is a * limited partnership—is a * general partner of the partnership; or (ii) otherwise—exercises day to day control of the entity; is a * foreign resident. (7) A trust is not an eligible venture capital partner if an Australian resident: (a) is or is likely to become presently entitled, for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 , to; or (b) has or is likely to have an individual interest, for the purposes of Division 5 of Part III of the Income Tax Assessment Act 1936 , in; a share of income of the trust, either directly or indirectly through one or more interposed partnerships or trusts. (8) For the purposes of this section, the place of residence of a * general partner of a * limited partnership: (a) that is a company or a limited partnership; and (b) that is a foreign resident; is the place in which the general partner has its central management and control. (9) For the purposes of this section, the place of residence of an entity referred to in paragraph (5)(a) is the place in which the entity has its central management and control.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 105 of 2004, effective Schedule 2: 1 Apr 2004 Remainder: Royal Assent | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 118-425 — Meaning of eligible venture capital investment —investments in companies

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: (i) an acquisition of * shares in a company; or (ii) an acquisition of options (including warrants) originally issued by a company to acquire shares in the company; or (iii) an acquisition of * convertible notes (other than convertible notes that are * debt interests) issued by a company; and (c) the company meets the requirements of subsections (2) to (7); 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 company; 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 company; does not exceed 30% of the partnership’s * committed capital. Certain entities not treated as connected entities (1A) In applying subparagraph (1)(d)(ii), ignore an entity that is a * connected entity of the company only because it is an * associate of the company because of an investment made in the entity by the partnership. Location within Australia (2) The company: (a) must, at the time the investment is made, be an Australian resident; and (b) if at that time the entity making the investment does not own any other investments in the company—must meet the following requirements: (i) more than 50% of the people who are currently engaged by the company 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 * Industry Innovation and Science Australia determines under section 25 ‑ 5 of the Venture Capital Act 2002 , starting from the time the investment is made. However, subparagraph (b)(i) or (ii) does not apply to the company if Industry Innovation and Science Australia so determines under section 25 ‑ 10 of the Venture Capital Act 2002 . See subsection (10) for the value of assets. Note: A company that fails to meet the requirements of this subsection can still be eligible in certain circumstances: see subsection (12A). Predominant activity (3) The company must satisfy at least 2 of these requirements: (a) more than 75% of the assets (determined by value) that are assets of either: (i) the company; or (ii) any entity controlled by the company in a way described in section 328 ‑ 125 (a controlled entity ); must be used primarily in activities that are not ineligible activities mentioned in subsection (13) of this section; (b) more than 75% of the persons who are employees of either or both of the following: (i) the company; (ii) any one or more of its controlled entities; must be engaged (as such employees) primarily in activities that are not ineligible activities mentioned in subsection (13) of this section; (c) more than 75% of the total assessable income, * exempt income and * non ‑ assessable non ‑ exempt income of: (i) the company; and (ii) each of its controlled entities; must come from activities that are not ineligible activities mentioned in subsection (13) of this section. Note 1: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made. Note 2: See subsection (10) for the value of assets. Note 3: A company that fails to meet at least 2 of the requirements can still be eligible if: (a) Industry Innovation and Science Australia determines that the company’s primary activity is not ineligible and the failure is temporary: see subsection (14); or (b) all amounts invested in the company are appropriately invested within the first 6 months: see subsection (14A). Industry Innovation and Science Australia may also determine that the activities of a controlled entity of the company are to be disregarded in applying this section to the company: see subsection (14B). Investment in other entities (4) The company must not invest, in another entity, any part of the amount invested, unless: (a) the other entity: (i) is * connected with the company (but not because the other entity is an * associate of the company as a result of an investment made in the other entity by the partnership); and (ii) meets the requirements of subsections (3) to (7); or (b) the other entity: (i) is, after the investment is made, controlled by the company in a way described in section 328 ‑ 125; and (ii) meets the requirements of subsections (2) to (7) of this section (other than subsection (3)). However, this subsection does not prevent the company 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 1: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made. Note 2: The other entity can be taken to meet the requirements of subsection (2) if Industry Innovation and Science Australia determines that its activities are complementary to activities of the company or other controlled entities and that the company meets those requirements at the time of the investment: see subsection (14C). Investment in the capacity of a trustee (4A) The company must not, in the capacity of a trustee, use any part of the amount invested. Note: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made. Registered auditor (5) The company must have as its auditor a * registered auditor at all times (if any) referred to in subsection (5A) during which the company: (a) is not a proprietary company within the meaning of the Corporations Act 2001 ; or (b) is a large proprietary company within the meaning of that Act; or (c) would exceed the * permitted entity value if the amount provided for under subsection 118 ‑ 440(9) were $12.5 million. Note: This requirement is ongoing. (5A) The times are: (a) the end of the income year in which the investment is made; and (b) all times after the end of that income year. Permitted entity value (6) The company must not, immediately before the investment is made, exceed the * permitted entity value. Listing (7) The company must be a company whose * shares: (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 company is taken to meet the requirements of this subsection in relation to any investment made by an * ESVCLP (whether or not shares in the company are so listed). Note: The additional requirements for ESVCLPs deal with listing in relation to initial investments by ESVCLPs in companies: see paragraph 118 ‑ 428(1)(a). Scrip for scrip investments (8) However, a company is taken to meet the requirements of subsections (2) to (7) if: (a) the investment is an acquisition of * shares in that company in exchange for shares in another company; and (b) at the time that the * VCLP, * ESVCLP, * AFOF or * eligible venture capital investor in question acquired the shares being exchanged, the other company meets the requirements of subsections (2) to (7), but not only because this subsection applies to the other company; and (c) the shares in the other company that are being exchanged are all of the shares in the other company that the entity making the investment owned at the time of the exchange. Debt interests (9) To avoid doubt, a * debt interest cannot be an eligible venture capital investment. The value of an asset or investment (10) The value of an asset, or an 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) the last audited accounts prepared for the entity for the purposes of the Corporations Act 2001 that relates to a period ending less than 18 months before that time; or (b) if there are no such audited accounts—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. (10A) However, for the purposes of this section, the value of the asset or investment at that time is the value provided for by section 118 ‑ 450 if: (a) there are no such audited accounts; and (b) the entity does not have an auditor at that time; and (c) the entity is not required under subsection (5) of this section to have an auditor at that time. Application to consolidated or consolidatable groups (12) This section applies to a * consolidated group or * consolidatable group as if: (a) the * head company of the group carried on all of the activities that are carried on by * subsidiary members of the group; and (b) the assets, employees and income of the subsidiary members of the group were assets, employees and income of the head company; and (c) each subsidiary member of the group were parts of the head company rather than separate entities. 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. Ineligible activities (13) 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 , as in force just before the commencement of Schedule 6 to the Statute Update (Smaller Government) Act 2018 ) 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. Note: Under Division 362 in Schedule 1 to the Taxation Administration Act 1953 , Industry Innovation and Science Australia can make rulings that activities, or classes of activities, are not ineligible activities. (13A) However, none of the following activities are ineligible activities mentioned in subsection (13): (a) developing technology for use in relation to an activity referred to in paragraph (13)(b), (c) or (e); (b) an activity that is ancillary or incidental to the activity of developing technology referred to in paragraph (a) of this subsection; (c) an activity referred to in paragraph (13)(b), (c) or (e) that is the subject of a finding in force under section 118 ‑ 432 at the time the investment is made. (13B) Subsection (13A) does not apply in circumstances prescribed by regulations made for the purposes of this subsection. Industry Innovation and Science Australia discretion (14) A company is taken to meet the requirements of subsection (3) even if it fails to satisfy at least 2 of the requirements in that subsection if * Industry Innovation and Science Australia determines under section 25 ‑ 15 of the Venture Capital Act 2002 that: (a) the company’s primary activity is not an ineligible activity mentioned in subsection (13); 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. Temporary exception to the requirements for predominant activity (14A) A company is taken to meet the requirements of subsection (3) even if it fails to satisfy at least 2 of the requirements in that subsection if: (a) the company’s sole purpose is making one or more investments that are * eligible venture capital investments, or would be eligible venture capital investments apart from paragraph (1)(d); and (b) during the 6 month period starting immediately before the first investment made by a * VCLP, * ESVCLP, * AFOF or * eligible venture capital investor, the company has used all of the amounts invested in it: (i) to make investments of a kind referred to in paragraph (a); or (ii) to engage in activities that are ancillary or incidental to making those investments. However, this subsection applies to the company only for that 6 month period. Activities disregarded in applying the predominant activity test (14B) If * Industry Innovation and Science Australia determines under section 25 ‑ 15 of the Venture Capital Act 2002 that: (a) the activities of the controlled entity of a company are complementary to one or more of the activities, of the company or its other controlled entities, that are not ineligible activities mentioned in subsection (13) of this section; and (b) the activities that, taken together, constitute the principal activities of the company and all of its controlled entities are not ineligible activities mentioned in subsection (13) of this section; and (c) in all the circumstances, it is appropriate that, for a period specified in the determination, the activities of the controlled entity are disregarded when applying subsection (3) of this section to the company; in applying subsection (3) of this section to the company, disregard, for the period specified in the determination, the activities of the controlled entity. Other entity can be taken to meet requirements relating to location in Australia (14C) In applying subsection (4) to a company in relation to its investment in another entity, the other entity is taken, for the purposes of subparagraph (4)(b)(ii), to meet the requirements of subsection (2) if * Industry Innovation and Science Australia determines under section 25 ‑ 15 of the Venture Capital Act 2002 that: (a) the activities of the other entity are complementary to one or more of the activities of the company or its other controlled entities; and (b) the company meets the requirements of subsection (2) of this section at the time the investment is made, or will meet those requirements at the time the investment is proposed to be made. Convertible notes and convertible preference shares (15) To the extent that an investment by an entity consists of the acquisition of a * share in a company by converting a * convertible note, or a convertible preference share, issued by the company, the investment is, for the purpose of determining whether the company meets the requirements of subsections (2) to (7), taken to have been made at the time when the entity last acquired the convertible note or convertible preference share.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 105 of 2004, effective Schedule 2: 1 Apr 2004 Remainder: Royal Assent | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 63 of 2016, effective Sch 1 (item 40): 20 Oct 2016 (s 2(1) item 1) | Amended by No 4 of 2018, effective Sch 6 (items 9–20, 27): 21 Feb 2018 (s 2(1) item 1) | Amended by No 124 of 2018, effective Sch 2, Sch 3 (items 1–3A, 6) and Sch 4: 1 Jan 2019 (s 2(1) item 1) | Amended by No 101 of 2021, effective Sch 1 (item 3): 11 Sept 2021 (s 2(1) item 1)

s 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 * Industry Innovation and Science Australia 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 Industry Innovation and Science Australia 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 assets (determined by value) that are assets of either: (i) the unit trust; or (ii) any entity controlled by the unit trust in a way described in section 328 ‑ 125 (a controlled entity ); must be used primarily in activities that are not ineligible activities mentioned in subsection (14) of this section; (b) more than 75% of the persons who are employees of either or both of the following: (i) the trustee of the unit trust; (ii) any one or more of the unit trust’s controlled entities; must be engaged (as such employees) primarily in activities that are not ineligible activities mentioned in subsection (14) of this section; (c) more than 75% of the total assessable income, * exempt income and * non ‑ assessable non ‑ exempt income of: (i) the unit trust; and (ii) each of its controlled entities; must come from activities that are not ineligible activities mentioned in subsection (14) of this section. 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 Industry Innovation and Science Australia determines that the unit trust’s primary activity is not ineligible and the failure is temporary: see subsection (15). Note 4: Industry Innovation and Science Australia may also determine that the activities of a controlled entity of the unit trust are to be disregarded in applying this section to the unit trust: see subsection (15A). Investment in other entities (5) The unit trust must not invest, in another entity, any part of the amount invested, unless: (a) the other entity: (i) is * connected with the unit trust (but not because the other entity is an * associate of the unit trust as a result of an investment made in the other entity by the partnership); and (ii) meets the requirements of subsections (4) to (8); or (b) the other entity: (i) is, after the investment is made, controlled by the unit trust in a way described in section 328 ‑ 125; and (ii) meets the requirements of subsections (3) to (8) of this section (other than subsection (4)). 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 1: This requirement is ongoing. It is not limited to the circumstances at the time the investment was made. Note 2: The other entity can be taken to meet the requirements of subsection (3) if Industry Innovation and Science Australia determines that its activities are complementary to activities of the unit trust or other controlled entities and that the unit trust meets those requirements at the time of the investment: see subsection (15B). Investment in the capacity of a trustee (5A) The unit trust must not, in the capacity of a trustee, use any part of the amount invested. 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 have as its auditor a * registered auditor at all times (if any) referred to in subsection (6A) during which the unit trust: (a) if it were a company: (i) would not be a proprietary company within the meaning of the Corporations Act 2001 ; or (ii) would be a large proprietary company within the meaning of that Act; or (b) would exceed the * permitted entity value if the amount provided for under subsection 118 ‑ 440(9) were $12.5 million. Note: This requirement is ongoing. (6A) The times are: (a) the end of the income year in which the investment is made; and (b) all times after the end of that income year. 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: (a) 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; or (b) the value provided for by section 118 ‑ 450 if: (i) the entity does not have an auditor at that time; and (ii) the entity is not required under subsection (6) of this section to have an auditor at 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 * 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 , as in force just before the commencement of Schedule 6 to the Statute Update (Smaller Government) Act 2018 ) 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. Note: Under Division 362 in Schedule 1 to the Taxation Administration Act 1953 , Industry Innovation and Science Australia can make rulings that activities, or classes of activities, are not ineligible activities. (14A) However, none of the following activities are ineligible activities mentioned in subsection (14): (a) developing technology for use in relation to an activity referred to in paragraph (14)(b), (c) or (e); (b) an activity that is ancillary or incidental to the activity of developing technology referred to in paragraph (a) of this subsection; (c) an activity referred to in paragraph (14)(b), (c) or (e) that is the subject of a finding in force under section 118 ‑ 432 at the time the investment is made. (14B) Subsection (14A) does not apply in circumstances prescribed by regulations made for the purposes of this subsection. Industry Innovation and Science Australia 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 * Industry Innovation and Science Australia 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. Activities disregarded in applying the predominant activity test (15A) If * Industry Innovation and Science Australia determines under section 25 ‑ 15 of the Venture Capital Act 2002 that: (a) the activities of the controlled entity of a unit trust are complementary to one or more of the activities, of the unit trust or its other controlled entities, that are not ineligible activities mentioned in subsection (14) of this section; and (b) the activities that, taken together, constitute the principal activities of the unit trust and all of its controlled entities are not ineligible activities mentioned in subsection (14) of this section; and (c) in all the circumstances, it is appropriate that, for a period specified in the determination, the activities of the controlled entity are disregarded when applying subsection (4) of this section to the unit trust; in applying subsection (4) of this section to the unit trust, disregard, for the period specified in the determination, the activities of the controlled entity. Other entity can be taken to meet requirements relating to location in Australia (15B) In applying subsection (5) to a unit trust in relation to its investment in another entity, the other entity is taken, for the purposes of subparagraph (5)(b)(ii), to meet the requirements of subsection (3) if * Industry Innovation and Science Australia determines under section 25 ‑ 15 of the Venture Capital Act 2002 that: (a) the activities of the other entity are complementary to one or more of the activities of the unit trust or its other controlled entities; and (b) the unit trust meets the requirements of subsection (3) of this section at the time the investment is made, or will meet those requirements at the time the investment is proposed to be made. 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.

Amendment history: Inserted by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4) | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 63 of 2016, effective Sch 1 (item 40): 20 Oct 2016 (s 2(1) item 1) | Amended by No 4 of 2018, effective Sch 6 (items 9–20, 27): 21 Feb 2018 (s 2(1) item 1) | Amended by No 124 of 2018, effective Sch 2, Sch 3 (items 1–3A, 6) and Sch 4: 1 Jan 2019 (s 2(1) item 1) | Amended by No 101 of 2021, effective Sch 1 (item 3): 11 Sept 2021 (s 2(1) item 1)

s 118-428 — Additional investment requirements for ESVCLPs

(1) The additional investment requirements for ESVCLPs , for an investment in a company or in a unit trust, are: (a) if the entity making the investment does not, when the investment is made, own any other investment in the company or unit trust: (i) * shares in the company; or (ii) units in the unit trust; are not, when the investment is made, listed for quotation in the official list of a stock exchange in Australia or a foreign country; and (b) if the investment is * pre ‑ owned when the investment is made: (i) the entity already owns investments in the company or unit trust; or (ii) the entity will, in connection with making the investment, make other investments in the company or unit trust, some or all of which are not pre ‑ owned; and (c) if the investment is pre ‑ owned when the investment is made—the sum of: (i) the value of the investment when the entity makes it; and (ii) the total value of all the other pre ‑ owned investments that the entity owns at that time; does not exceed 20% of the partnership’s * committed capital. Note: See subsection (3) for the value of investments. (2) An investment is pre ‑ owned if it was issued or allotted to an entity other than the entity that owns the investment. However, the investment is not pre ‑ owned if it: (a) was issued: (i) to an underwriter or sub ‑ underwriter of the issue of the investment; or (ii) to a person for the purpose of being offered for sale; and (b) was still held by the underwriter, sub ‑ underwriter or person immediately before being acquired by the entity that now owns the investment. (3) The value of an investment of an entity at a particular time for the purposes of this section is the value of the investment as shown in: (a) the last audited accounts prepared for the entity for the purposes of the Corporations Act 2001 that relates to a period ending less than 18 months before that time; or (b) 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. (4) However, for the purposes of this section, the value of the investment at that time is the value provided for by section 118 ‑ 450 if: (a) there are no such audited accounts; and (b) the entity does not have an auditor at that time.

Amendment history: Inserted by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3)

s 118-430 — Meaning of at risk

An * eligible venture capital investment is at risk if the entity that owns the investment had no * arrangement as to: (a) the maintenance of the value of the investment; or (b) the maintenance of any earnings or other return that might be made from owning the 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.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent

s 118-432 — Findings of substantially novel applications of technology

Public findings (1) * Industry Innovation and Science Australia may, by legislative instrument, find that each activity within a specified class is a substantially novel application of one or more technologies. Note: A substantially novel application of a technology could, for example, take the form of a substantially novel product or service. Private findings (2) * Industry Innovation and Science Australia may, on application by a company or unit trust, make a written decision: (a) finding that a specified activity is a substantially novel application of one or more technologies; or (b) refusing to make such a finding about a specified activity. Note: A refusal to make a finding is reviewable (see Part 5 of the Venture Capital Act 2002 ). Period for which a finding is in force (3) Subject to variation or revocation, a finding under subsection (1) or paragraph (2)(a) is in force for the period specified in the finding. Note: For variation and revocation, see subsection 33(3) of the Acts Interpretation Act 1901 . Applications for private findings (4) An application for a finding under paragraph (2)(a) must be in the * form approved by Industry Innovation and Science Australia. (5) * Industry Innovation and Science Australia must notify the applicant in writing of any decision under subsection (2) about the application. (6) A failure to comply with subsection (5) does not affect the validity of a finding or decision.

Amendment history: Inserted by No 124 of 2018, effective Sch 2, Sch 3 (items 1–3A, 6) and Sch 4: 1 Jan 2019 (s 2(1) item 1) | Amended by No 101 of 2021, effective Sch 1 (item 3): 11 Sept 2021 (s 2(1) item 1)

s 118-435 — Special rule relating to investment in foreign resident holding companies

(1) A company that meets the requirements of subsections 118 ‑ 425(6) and (7) is treated as also meeting the requirements of subsections 118 ‑ 425(2), (3), (4), (4A) and (5) if: (a) it is a resident of: (i) Canada; or (ii) France; or (iii) Germany; or (iv) Japan; or (v) the United Kingdom; or (vi) the United States of America; or (vii) any other foreign country prescribed by the regulations; and (b) it beneficially owns all the * shares in another company or all the units in a unit trust; and (c) it does not carry on any * business other than to support the primary activity of the other company or unit trust; and (d) the other company meets the requirements of subsections 118 ‑ 425(2) to (7), or the unit trust meets the requirements of subsections 118 ‑ 427(3) to (8), as the case requires. (2) However, if: (a) the company is so treated as meeting those requirements; and (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; then: (c) any eligible venture capital investments already made in the company or unit trust cease to be eligible venture capital investments; and (d) any further investments made in the company or unit trust are not eligible venture capital investments.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 118-440 — Meaning of permitted entity value

(1) An entity exceeds the permitted entity value immediately before a proposed investment is made in the entity if, at that time, the sum of the following exceeds the amount provided for under subsection (9): (a) the total value of the entity’s assets; (b) the total value of the assets of any other entity * connected with the entity to the extent that they are not reflected in the value of any assets referred to in paragraph (a). 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). (2) The total value of the assets of an entity is the total value of its assets (both current and non ‑ current) as shown in: (a) the last audited accounts prepared for the entity for the purposes of the Corporations Act 2001 that relates to a period ending less than 18 months before that time; or (b) if there are no such audited accounts—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. (2A) However, for the purposes of this section, the total value of its assets at that time is the sum of the values of those assets provided for by section 118 ‑ 450 if: (a) there are no such audited accounts; and (b) the entity does not have an auditor at that time; and (c) the entity is not required under subsection 118 ‑ 425(5) or 118 ‑ 427(6) to have an auditor at that time. (3) In applying paragraphs (1)(b), (5)(b) and (7)(c), ignore the total value of the assets of an entity that is * connected with the entity first ‑ mentioned in subsection (1) (the target entity ) either immediately before or immediately after the investment referred to in that subsection if it is so connected only because of * eligible venture capital investments made in both of those entities by the same * VCLP, * ESVCLP, * AFOF or * eligible venture capital investor. (4) In applying paragraphs (1)(b), (5)(b) and (7)(c), ignore the total value of the assets of an entity that, immediately after the investment is made, is not * connected with the target entity. (5) Despite the previous provisions of this section, the target entity exceeds the permitted entity value immediately before the time (the investment time ) when the * VCLP, * ESVCLP, * AFOF or * eligible venture capital investor made the investment in the target entity if: (a) the target entity was * connected with an entity (the linked entity ) in which the VCLP, ESVCLP, AFOF or eligible venture capital investor had made an * eligible venture capital investment at some time in the period of 12 months before the investment time; and (b) the sum of the total value of the assets of the target entity and of any entity * connected with the target entity (at the investment time) and the linked entity and of any entity connected with the linked entity (at the time that the entity making the investment made its investment in the linked entity) exceeds the amount provided for under subsection (9). (6) The Commissioner may determine that subsection (5) does not apply if the Commissioner is satisfied that: (a) the activities of the target entity are not the same as, not an integral part of and not a necessary support for the activities of the linked entity; and (b) the making of the investment in the target entity is not part of a * scheme to acquire interests in all or a substantial part of a group of companies that are * connected with each other. (7) Despite the previous provisions of this section, the target entity exceeds the permitted entity value immediately before the investment time if: (a) the target entity was * connected with an entity (also the linked entity ) in which the * VCLP, * ESVCLP, * AFOF or * eligible venture capital investor had made an * eligible venture capital investment more than 12 months before the investment time; and (b) the activities of the target entity are the same as, are an integral part of or are a necessary support for the activities of the linked entity; and (c) the sum of the total value of the assets of the target entity and of any entity * connected with the target entity (at the investment time) and the linked entity and of any entity connected with the linked entity (at the time that the entity making the investment made its investment in the linked entity) exceeds the amount provided for under subsection (9). (8) In applying paragraphs (5)(b) and (7)(c), ignore the total value of the assets of an entity that is * connected with the linked entity either immediately before or immediately after the investment in the linked entity if it is so connected only because of * eligible venture capital investments made in both of those entities by the same * VCLP, * ESVCLP, * AFOF or * eligible venture capital investor. (9) The amount in relation to a proposed investment is: (a) if an * ESVCLP is to make the proposed investment—$50 million; or (b) in any other case—$250 million.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6) | Amended by No 105 of 2004, effective Schedule 2: 1 Apr 2004 Remainder: Royal Assent | Amended by No 78 of 2007, effective Schedule 7 (items 2–14): 1 July 2005 Schedule 8 (items 350–353): 19 Dec 2002 (s 2(1) item 7) Remainder: Royal Assent | Amended by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 118-445 — Meaning of committed capital

(1) A partner’s committed capital in a partnership is the sum of the amounts that the partner may, under the partnership agreement establishing the partnership, become obliged to contribute to the partnership. (2) It does not matter whether: (a) the partner contributes all of those amounts; or (b) any amounts contributed are subsequently returned to the partner; or (c) the contributions give rise to * equity interests or * debt interests in the partnership, or both. (3) A partnership’s committed capital is the sum of the committed capital of all of the partnership’s partners.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 136 of 2002, effective Sch 1 (items 1, 5): 31 May 2000 (s 2(1) items 2, 4) Sch 1 (items 2–4, 6–27), Sch 2 (items 18–28), Sch 3 (items 2–18) and Sch 4 (items 1, 2): 19 Dec 2002 (s 2(1) items 3, 5, 6)

s 118-450 — Values of assets and investments of entities without auditors

(1) If, under a provision of this Subdivision, the value of an asset or investment at a particular time is the value provided for by this section, that value is: (a) if paragraph (b) does not apply—its * market value at that time; or (b) the amount stated to be its current market value, at that time or a time in the 12 months preceding that time, in a statutory declaration by: (i) if the entity is a company—the directors of the company; or (ii) if the entity is a unit trust—the trustees of the unit trust. (2) Paragraph (1)(b) does not apply if the Commissioner reasonably believes that the amount stated in the statutory declaration to be the * market value of the asset or investment at the relevant time is inaccurate.

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3)) | Repealed by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 118-455 — Impact Assessment of this Subdivision

(1) As soon as practicable after 24 months after the Treasury Laws Amendment (Tax Integrity and Other Measures) Act 2018 receives the Royal Assent, the Minister must cause an impact assessment of the operation of this Subdivision and other related tax concessions to be conducted. (2) The impact assessment must: (a) examine the operation of the tax concession regime for: (i) investments made through a * VCLP, * ESVCLP or * AFOF; and (ii) investments made directly by foreign residents registered under Part 3 of the Venture Capital Act 2002 ; and (b) be conducted by the Department and Industry Innovation and Science Australia; and (c) make provision for public consultation. (3) For the purposes of conducting the impact assessment, the reference to Industry Innovation and Science Australia in item 6 of the table in subsection 355 ‑ 65(4) of Schedule 1 to the Taxation Administration Act 1953 is taken to include the Secretary of the Department. (4) The Minister must cause a written report about the impact assessment to be prepared. (5) The Minister must cause a copy of the report to be tabled in each House of the Parliament within 15 sitting days of that House after the day on which the report is given to the Minister.

Amendment history: Inserted by No 124 of 2018, effective Sch 2, Sch 3 (items 1–3A, 6) and Sch 4: 1 Jan 2019 (s 2(1) item 1) | Amended by No 101 of 2021, effective Sch 1 (item 3): 11 Sept 2021 (s 2(1) item 1)

s 118-500 — What this Subdivision is about

A foreign resident tax exempt pension fund that invests in venture capital equity in an Australian company or fixed trust (a resident investment vehicle) can disregard a capital gain or capital loss it makes from a CGT event that happens to that equity if: (a) the entity is registered under the Pooled Development Funds Act 1992 ; and (b) the entity owned the equity for at least 12 months. Table of sections 118 ‑ 505 Exemption for certain foreign venture capital 118 ‑ 510 Meaning of resident investment vehicle 118 ‑ 515 Meaning of venture capital entity 118 ‑ 520 Meaning of superannuation fund for foreign residents 118 ‑ 525 Meaning of venture capital equity

Amendment history: Inserted by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16)

s 118-505 — Exemption for certain foreign venture capital

(1) A * capital gain or * capital loss is disregarded if it is made from a * CGT event happening in relation to a * CGT asset that is * venture capital equity where the asset: (a) was * acquired by a * venture capital entity; and (b) at the time of the CGT event: (i) was owned by that entity; and (ii) had been owned by that entity for at least 12 months. (2) The * venture capital entity must be registered under Part 7A of the Pooled Development Funds Act 1992 at the time of the * CGT event.

Amendment history: Inserted by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2))

s 118-510 — Meaning of resident investment vehicle

(1) A resident investment vehicle is a company that is an Australian resident, or a trust that is a * resident trust for CGT purposes, if: (a) the sum of: (i) the total value of the assets of the company or trust, and (ii) the total value of the assets of any company or trust * connected with the first company or trust; and (iii) the amount of the investment proposed to be made in venture capital equity in the company or trust by the relevant * venture capital entity; is not more than $50,000,000 just before the time (the acquisition time ) when the relevant venture capital entity acquires venture capital equity in the company or trust; and (b) the primary activity of the company or trust is not, at any time, property development or land ownership. (2) However, a trust is not a resident investment vehicle unless entities have * fixed entitlements to all of the income and capital of the trust. (3) The total value of the assets of a company or trust is the total value of its assets (both current and non ‑ current) as shown in: (a) the last audited accounts prepared for the company or trust for the purposes of the Corporations Act 2001 that relates to a period ending less than 18 months before the acquisition time; or (b) if there are no such audited accounts—a statement audited by the company’s or trust’s auditor showing that value as at a time no longer than 12 months before the acquisition time.

Amendment history: Inserted by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Amended by No 55 of 2001, effective s 4–14 and Sch 3 (items 264–275): 15 July 2001 (s 2(1), (3))

s 118-515 — Meaning of venture capital entity

(1) An entity (except a partner in a partnership) is a venture capital entity if: (a) it is a foreign resident; and (b) it is a * superannuation fund for foreign residents; and (c) it is not a * prescribed dual resident; and (d) it is a resident of: (i) Canada; or (ii) France; or (iii) Germany; or (iv) Japan; or (v) the United Kingdom; or (vi) the United States of America; or (vii) some other foreign country prescribed by the regulations; and (e) its income is exempt, or effectively exempt, from taxation in its country of residence. (2) A partner in a partnership is a venture capital entity if: (a) all of the partners in it are entities that are * venture capital entities under subsection (1); or (b) the partnership is a * limited partnership and: (i) all of the partners in it (except its general partner or managing partner) are venture capital entities under subsection (1); and (ii) its general partner or managing partner has interests in less than 10% of the total value of the assets of the partnership.

Amendment history: Inserted by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 9 of 2007, effective Schedule 1 (items 1, 2, 5–17, 24(1)), Schedule 2 (items 1, 2), Schedule 3, Schedule 5 (items 6–8, 36(1)) and Schedule 10: Royal Assent

s 118-520 — Meaning of superannuation fund for foreign residents

(1) A fund is a superannuation fund for foreign residents at a time if: (a) at that time, it is: (i) an indefinitely continuing fund; and (ii) a provident, benefit, superannuation or retirement fund; and (b) it was established in a foreign country; and (c) it was established, and is maintained at that time, only to provide benefits for individuals who are not Australian residents; and (d) at that time, its central management and control is carried on outside Australia by entities none of whom is an Australian resident. (2) However, a fund is not a superannuation fund for foreign residents if: (a) an amount paid to the fund or set aside for the fund has been or can be deducted under this Act; or (b) a * tax offset has been allowed or is allowable for such an amount.

Amendment history: Inserted by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2)) | Amended by No 4 of 2007, effective Schedule 1 and Schedule 2 (items 11–16, 26): Royal Assent | Repealed and substituted by No 9 of 2007, effective Schedule 1 (items 1, 2, 5–17, 24(1)), Schedule 2 (items 1, 2), Schedule 3, Schedule 5 (items 6–8, 36(1)) and Schedule 10: Royal Assent

s 118-525 — Meaning of venture capital equity

(1) A * CGT asset is venture capital equity for a * venture capital entity if it is a * share in a company or an interest in a trust where: (a) the company or trust is a * resident investment vehicle; and (b) the share or interest was issued or allotted to the entity by the company or trust; and (c) the entity was at risk in owning the share or interest in that it had no * arrangement (either before or after the share or interest was issued or allotted) as to: (i) the maintenance of the value of the share or interest; or (ii) any earnings or other return that might be made from owning it; or (iii) protection from commercial loss because of owning it. Example: A company borrows money to purchase some shares. The terms of the loan include a term that, if the value of the shares falls below the amount of the loan, the company can repay the loan by transferring the shares to the lender. The company’s ownership of the shares is not at risk, because there is no possibility that it can lose money under the transaction. (2) However, * shares or interests in the * resident investment vehicle issued or allotted to a * venture capital entity are not venture capital equity for the entity if: (a) one or more of these events happens: (i) a share or interest in the resident investment vehicle that was * acquired by some other entity before that issue or allotment is cancelled or redeemed; or (ii) there is a return of some of the capital of the resident investment vehicle that was acquired before that issue or allotment; or (iii) value is shifted out of a share or interest in that vehicle that was acquired before that issue or allotment; and (b) it is reasonable to conclude that the happening of the event referred to in paragraph (a) is connected to that issue or allotment, or to some * arrangement between the entities concerned. Example: The capital of an Australian company is 100,000 shares, with a market value of $1 per share. The shares have full voting and dividend rights. The Australian company issues another 100,000 shares to a foreign company. The new shares are issued at one cent each, but have very limited voting and dividend rights. The Australian company then changes the rights attaching to its shares so that the new shares have full voting and dividend rights, and the original shares have none. Value has been shifted out of the original shares, effectively converting “old equity” to “new equity”. (3) In deciding whether it is reasonable to reach the conclusion referred to in paragraph (2)(b), these matters are relevant: (a) whether the amount of the decrease in the * net value of the * resident investment vehicle because of the happening of the event referred to in paragraph (2)(a) is the same as, or is calculated by reference to, the value of the issue or allotment of * shares or interests to the * venture capital entity; and (b) the time lapse between the happening of that event and that issue or allotment.

Amendment history: Inserted by No 165 of 1999, effective s 4, Sch 1 (items 1–53, 61, 62), Sch 2, Sch 3 (items 1–4, 18) and Sch 4: 10 Dec 1999 (s 2(1), (2))

s 118-550 — Demutualisation of Tower Corporation

(1) This section applies if, just before the mutual entity known in New Zealand as Tower Corporation ceased to be a mutual entity, you had membership rights in that entity. Note: Tower Corporation demutualised on 1 October 1999. No capital gain or capital loss from end of membership rights (2) Disregard any * capital gain or * capital loss that resulted from any of your membership rights in Tower Corporation ceasing to exist when that entity ceased to be a mutual entity. Note: Subsection (2) applies to you even if, because you could not be located at the time of demutualisation, you were not immediately issued with shares in the demutualised entity in substitution for your old membership rights, and rights to shares were instead put aside in a trust. Cost base of replacement assets (3) The * cost base and the * reduced cost base of any * shares or other * CGT assets that you * acquire in substitution for the membership rights that have ceased to exist do not include any amounts that you paid in acquiring or maintaining those old rights.

Amendment history: Inserted by No 57 of 2002, effective Sch 2: 1 July 2002 (s 2(1) item 3) Sch 4 (items 3, 4): 1 July 2000 (s 2(1) item 5) Sch 4 (items 5–8), Sch 7, Sch 9 (items 9, 11, 12, 15–20, 22–40, 45), Sch 11 (items 2–5), Sch 12 (items 16–18, 20, 25, 26): 3 July 2002 (s 2(1) items 6, 7, 9, 11, 13, 15, 16, 18, 28, 30, 33) Sch 9 (items 10, 13, 14, 21) and Sch 12 (items 23, 24): 1 July 1997 (s 2(1) items 10, 12, 14, 32) Sch 12 (item 19): 30 June 1998 (s 2(1) item 29) Sch 12 (items 21, 22): 22 June 1998 (s 2(1) item 31) Sch 12 (items 27, 28): 16 Apr 1998 (s 2(1) item 34) Sch 12 (item 29): 19 Sept 1997 (s 2(1) item 35)

s 118-560 — Object

(1) This Subdivision and its related provisions set out special rules for * look ‑ through earnout rights. The object of these rules is to avoid unnecessary compliance costs and disadvantageous tax outcomes when entities involved in the sale of a business: (a) cannot agree on the current value of some or all of the business’ assets due to uncertainty about the future economic performance of the business; and (b) resolve this uncertainty by agreeing to potentially provide future additional consideration linked to this performance. (2) These rules achieve this object by: (a) disregarding any * capital gain or * capital loss relating to the creation of a * look ‑ through earnout right; and (b) for the acquirer of the business—treating any * financial benefits provided (or received) under the right as forming part of (or reducing) the cost base or reduced cost base of the business assets; and (c) for the seller of the business—treating any financial benefits received (or provided) under the right as increasing (or reducing) the capital proceeds for the business assets. Note: Sections 112 ‑ 36 and 116 ‑ 120 are 2 of the more important related provisions that set out these rules.

Amendment history: Inserted by No 10 of 2016, effective Sch 1 (items 1–32, 38, 39) and Sch 2 (items 3–9, 30): 26 Feb 2016 (s 2(1) items 2, 4)

s 118-565 — Look ‑ through earnout rights

Look ‑ through earnout rights—main case (1) A look ‑ through earnout right is a right for which the following conditions are met: (a) the right is a right to future * financial benefits that are not reasonably ascertainable at the time the right is created; (b) the right is created under an * arrangement that involves the * disposal of a * CGT asset; (c) the disposal causes * CGT event A1 to happen; (d) just before the CGT event, the CGT asset was an * active asset of the entity who disposed of the asset; Note: For extra ways to be an active asset, see section 118 ‑ 570. (e) all of the financial benefits that can be provided under the right are to be provided over a period ending no later than 5 years after the end of the income year in which the CGT event happens; (f) those financial benefits are contingent on the economic performance of: (i) the CGT asset; or (ii) a business for which it is reasonably expected that the CGT asset will be an active asset for the period to which those financial benefits relate; (g) the value of those financial benefits reasonably relates to that economic performance; (h) the parties to the arrangement deal with each other at * arm’s length in making the arrangement. Matters affecting the 5 ‑ year maximum period (2) The condition in paragraph (1)(e) is not met, and is treated as never having been met, for the right if: (a) the * arrangement includes an option to extend or renew the arrangement; or (b) the parties to the arrangement vary the arrangement; or (c) those parties enter into another arrangement over the * CGT asset or a business for which it is reasonably expected that the CGT asset will be an * active asset; so that a party could, or does, provide * financial benefits under the right (or one or more equivalent rights) over a total period ending later than 5 years after the end of the income year in which the * CGT event happens. (3) For the purposes of paragraph (1)(e) or subsection (2), in working out the period over which * financial benefits under a right can be provided, disregard any part of an * arrangement that allows for an entity to defer providing such a financial benefit if: (a) the deferral is contingent on an event happening that is beyond the control of the parties to the arrangement; and (b) the deferral cannot change the amount of any financial benefit provided, or to be provided, under the right; and (c) when the arrangement is entered into, the contingent event is not reasonably expected to happen. Look ‑ through earnout rights—rights for ending other rights (4) A look ‑ through earnout right is a right to receive one or more future * financial benefits that: (a) are for ending a right to which subsection (1) applies; and (b) are certain. Note: This subsection will not apply if the old right ends as described in subsection (2), as subsection (2) causes the old right to be treated as if it had never been a right to which subsection (1) applies.

Amendment history: Inserted by No 10 of 2016, effective Sch 1 (items 1–32, 38, 39) and Sch 2 (items 3–9, 30): 26 Feb 2016 (s 2(1) items 2, 4)

s 118-570 — Extra ways a CGT asset can be an active asset

(1) For the purposes of this Subdivision, treat a * CGT asset as if it were an active asset of an entity at a particular time, if: (a) the entity owns it at that time; and (b) it is either a * share in a company, or an interest in a trust; and (c) at that time, the entity: (i) is a * CGT concession stakeholder of the company or trust; or (ii) if the entity is not an individual—has a * small business participation percentage in the company or trust of at least 20%; and (d) at that time, the company or trust: (i) is carrying on a * business, and has been carrying on a business since the start of the most recent income year ending before that time; and (ii) is not a * subsidiary member of a * consolidated group; and (e) the assessable income of the company or trust for that most recent income year was greater than nil, and at least 80% of that assessable income was: (i) from the carrying on of one or more businesses; but (ii) not * derived (directly or indirectly) from an asset of a kind to which paragraph 152 ‑ 40(4)(d) or (e) applies. Note: Paragraphs 152 ‑ 40(4)(d) and (e) refer to financial instruments and assets used to derive interest, annuities, rent, royalties or foreign exchange gains. (2) For the purposes of this Subdivision, treat a * CGT asset as if it were an active asset of an entity at a particular time, if subsection 152 ‑ 40(3) would have been satisfied for the asset at that time had paragraph 152 ‑ 40(3)(a) only required the asset to be: (a) a * share in a company; or (b) an interest in a trust. Note: This enables shares and interests in foreign entities to be active assets for the purposes of this Subdivision. (3) Subsections (1) and (2) do not limit section 152 ‑ 40 (about active assets).

Amendment history: Inserted by No 10 of 2016, effective Sch 1 (items 1–32, 38, 39) and Sch 2 (items 3–9, 30): 26 Feb 2016 (s 2(1) items 2, 4)

s 118-575 — Creating and ending look ‑ through earnout rights

Disregard a * capital gain or * capital loss you make because: (a) * CGT event C2 happens in relation to a * look ‑ through earnout right you receive; or (b) CGT event D1 happens when you create a look ‑ through earnout right in another entity.

Amendment history: Inserted by No 10 of 2016, effective Sch 1 (items 1–32, 38, 39) and Sch 2 (items 3–9, 30): 26 Feb 2016 (s 2(1) items 2, 4)

s 118-580 — Temporarily disregard capital losses affected by look ‑ through earnout rights

(1) Temporarily disregard a portion of a * capital loss you make from * disposing of a * CGT asset if the capital loss could be reduced by you receiving one or more * financial benefits under a * look ‑ through earnout right relating to the CGT asset and the disposal. (2) The portion of the * capital loss that is temporarily disregarded is: (a) if those * financial benefits can never exceed a maximum amount that is certain—so much of the capital loss as is equal to that maximum amount; or (b) otherwise—all of the capital loss. Note: When you receive a financial benefit under the look ‑ through earnout right: (a) you cease to disregard under this section a portion of your loss related to the amount of that financial benefit; and (b) your capital proceeds for the disposal increase (see paragraph 116 ‑ 120(1)(b)), causing a reduction in the amount of your loss.

Amendment history: Inserted by No 10 of 2016, effective Sch 1 (items 1–32, 38, 39) and Sch 2 (items 3–9, 30): 26 Feb 2016 (s 2(1) items 2, 4)

s 119-1 — What this Division is about

If you are an individual who is an Australian resident, you may have to pay extra income tax relating to certain capital gains you make during an income year to ensure, before applying offsets, a rate of tax of 30% on so much of those gains as remains after applying section 119 ‑ 5. This Division sets out how to work out when extra income tax is payable and matters relating to the amount of that tax. The requirement to pay extra income tax does not apply if you received certain payments during the income year. Table of sections Operative provisions 119 ‑ 5 Your minimum tax capital gain for an income year 119 ‑ 10 When extra income tax is payable on your minimum tax capital gain 119 ‑ 15 Exception for recipients of certain payments

Amendment history: Inserted by No 49 of 2026, effective sch 1 (items 1-51, 54-59, 64-79A, 82-84), sch 3, sch 4 (items 1-17): 1 July 2026 (s 2(1) items 2-4, 6) sch 2 (items 1-5): 27 June 2026 (s 2(1) item 5)

s 119-5 — Your minimum tax capital gain for an income year

(1) Your minimum tax capital gain (if any) for an income year is worked out as follows: (a) first, total the amounts of * capital gains (if any) covered by subsection (2) that are remaining after applying step 6 of the method statement in subsection 102 ‑ 5(1); (b) next, reduce the result of paragraph (a) (but not below nil) by the total amount (if any) you are entitled to deduct, for the income year, under any of the following: (i) Division 30 (about gifts or contributions); (ii) Division 31 (about conservation covenants). (2) This subsection covers a * capital gain you made during the income year, including because of section 115 ‑ 215 (about attribution of trust gains to beneficiaries), if: (a) the capital gain is: (i) a * residential capital gain; or (ii) a * non ‑ residential capital gain; and (b) section 115 ‑ 102 (about new residential dwellings) does not apply to the capital gain; and (c) section 115 ‑ 125 (about affordable housing) does not apply to the capital gain.

Amendment history: Inserted by No 49 of 2026, effective sch 1 (items 1-51, 54-59, 64-79A, 82-84), sch 3, sch 4 (items 1-17): 1 July 2026 (s 2(1) items 2-4, 6) sch 2 (items 1-5): 27 June 2026 (s 2(1) item 5)

s 119-10 — When extra income tax is payable on your minimum tax capital gain

(1) You must pay extra income tax on your * minimum tax capital gain for an income year if: (a) you are an individual; and (b) you are an Australian resident at any time during the income year; and (c) you have a * minimum tax gap amount for the income year. Note: Section 12AA of the Income Tax Rates Act 1986 sets the rate at which you must pay extra income tax on your minimum tax capital gain. It does so in such a way that the extra income tax you must pay equals the minimum tax gap amount. (2) Use this method statement to work out whether you have a minimum tax gap amount for the income year: Method statement Step 1. Multiply your * minimum tax capital gain for the income year by 30%. Step 2. Work out your basic income tax liability for the income year under step 2 of the method statement in subsection 4 ‑ 10(3), disregarding this Division. Step 3. Work out what the amount at step 2 of this method statement would be if your taxable income for the income year were reduced (but not below nil) by the amount of your * minimum tax capital gain. Step 4. Subtract the amount at step 3 from the amount at step 2. Step 5. Subtract the amount at step 4 from the amount at step 1. Step 6. Round the result down to the nearest whole dollar if the result is not already a number of whole dollars. Step 7. If the result (as rounded) is more than nil, you have a minimum tax gap amount for the income year equal to that amount.

Amendment history: Inserted by No 49 of 2026, effective sch 1 (items 1-51, 54-59, 64-79A, 82-84), sch 3, sch 4 (items 1-17): 1 July 2026 (s 2(1) items 2-4, 6) sch 2 (items 1-5): 27 June 2026 (s 2(1) item 5)

s 119-15 — Exception for recipients of certain payments

(1) Section 119 ‑ 10 does not apply to you if you receive, at any time during the income year, a payment covered by any of subsections (2) to (5). Social Security Act 1991 payments (2) This subsection covers the following payments under the Social Security Act 1991 : (a) an age pension under Part 2.2 of that Act; (b) an austudy payment under Part 2.11A of that Act; (c) a carer payment under Part 2.5 of that Act; (d) a disability support pension under Part 2.3 of that Act; (e) a double orphan pension under Part 2.20 of that Act; (f) a jobseeker payment under Part 2.12 of that Act; (g) parenting payment under Part 2.10 of that Act; (h) special benefit under Part 2.15 of that Act; (i) youth allowance under Part 2.11 of that Act. Other social support payments (3) This subsection covers the following payments: (a) family tax benefit under the A New Tax System (Family Assistance) Act 1999 ; (b) a stillborn baby payment under the A New Tax System (Family Assistance) Act 1999 ; (c) farm household allowance under Part 2 of the Farm Household Support Act 2014 ; (d) parental leave pay under the Paid Parental Leave Act 2010 ; (e) a payment under the scheme known as the ABSTUDY scheme that includes an amount identified as living allowance. Veterans’ Entitlements Act 1986 payments (4) This subsection covers the following payments under the Veterans’ Entitlements Act 1986 : (a) an age service pension under Division 3 of Part III of that Act; (b) a carer service pension under former Division 6 of Part III of that Act, as saved by clause 8 of Schedule 5 to that Act; (c) income support supplement under Part IIIA of that Act; (d) an invalidity service pension under Division 4 of Part III of that Act; (e) a partner service pension under Division 5 of Part III of that Act; (f) a veteran payment under section 45SB of that Act; (g) a pension under Part II or IV of that Act at a rate determined under or by reference to subsection 30(1) of that Act; (h) a pension under Part II or IV of that Act at a rate determined under or by reference to paragraph 30(2)(a) or (b) of that Act; (i) a pension under Part II or IV of that Act at a rate applicable under section 23, 24 or 25 of that Act. Military Rehabilitation and Compensation Act 2004 payments (5) This subsection covers the following payments under the Military Rehabilitation and Compensation Act 2004 : (a) a Special Rate Disability Pension under Part 6 of Chapter 4 of that Act; (b) the weekly amount mentioned in paragraph 234(1)(b) of that Act, including a reduced weekly amount because of a choice under section 236 of that Act; (c) a lump sum mentioned in subsection 236(5) of that Act.

Amendment history: Inserted by No 49 of 2026, effective sch 1 (items 1-51, 54-59, 64-79A, 82-84), sch 3, sch 4 (items 1-17): 1 July 2026 (s 2(1) items 2-4, 6) sch 2 (items 1-5): 27 June 2026 (s 2(1) item 5)

s 121-10 — What this Division is about

You must keep records of matters that affect the capital gains and losses you make. You must retain them for 5 years after the last relevant CGT event. Table of sections Operative provisions 121 ‑ 20 What records you must keep 121 ‑ 25 How long you must retain the records 121 ‑ 30 Exceptions 121 ‑ 35 Asset register entries

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4))

s 121-20 — What records you must keep

(1) You must keep records of every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether you have made a * capital gain or * capital loss from a * CGT event. (It does not matter whether the CGT event has already happened or may happen in the future.) Note 1: There are exceptions: see section 121 ‑ 30. Example 1: You dispose of a CGT asset. The records that are relevant to working out your capital gain or loss are records of: • the date you acquired the asset; • the date you disposed of it; • each element of its cost base and reduced cost base and the effect of indexation on those elements; • what you sold it for (the capital proceeds). Example 2: Company A disposes of a CGT asset it acquired from company B (a member of the same wholly ‑ owned group and a foreign resident) where company B obtained a roll ‑ over under Subdivision 126 ‑ B. In addition to the records mentioned in example 1, company A needs records showing: • the status of the 2 companies as members of the group; • which company is the ultimate holding company in the group; • the cost base and reduced cost base of the asset in the hands of company B just before the roll ‑ over (because these become company A’s cost base and reduced cost base). Example 3: CGT event G2 (about shifts in share values) happens involving company X and Greg (a controller (for CGT purposes) of company X). Z Nominees Pty Ltd (an associate of Greg’s) suffers a material decrease in the value of its shares in company X as a result of the shift. Z Nominees needs records showing: • the essential elements of the relevant scheme; • the date when the share value shift occurred; • the amounts of the decreases and increases in the market values of all shares involved in the scheme; • if shares are issued at a discount under the scheme, the amount of the discount; • the cost bases and market values of the shares that decreased in value. Note 2: There is an administrative penalty if you do not keep records as required by this Division: see section 288 ‑ 25 in Schedule 1 to the Taxation Administration Act 1953 . (2) The records must be in English, or be readily accessible and convertible into English. They must show what is described in this section. (They show something if they include whatever material is necessary for that thing to be easily identified or worked out.) (3) They must show the nature of the act, transaction, event or circumstance, the day when it happened or arose and: (a) in the case of an act—who did it; and (b) in the case of a transaction—who were the parties to it. (4) They must show details (including relevant amounts) of how the act, transaction, event or circumstance is relevant (or can reasonably be expected to be relevant) to working out whether you have made a * capital gain or * capital loss from a * CGT event. (5) If the necessary records of an act, transaction, event or circumstance do not already exist, you must reconstruct them or have someone else reconstruct them. Example: Your capital gain or capital loss from a CGT event may depend on the market value of property at a particular time. To record that market value properly, you may need to get a valuation done. Penalty: 30 penalty units. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. (6) An offence under this section is an offence of strict liability. Note: For strict liability , see section 6.1 of the Criminal Code .

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 91 of 2000, effective Sch 2 (items 49–53), Sch 4A and Sch 5: 1 July 2000 (s 3(1), (6)) | Amended by No 146 of 2001, effective Sch 4 (items 92–101): 15 Dec 2001 (s 2(1)) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11)

s 121-25 — How long you must retain the records

(1) You must retain records that section 121 ‑ 20 requires you to keep. (2) You must retain them until the end of 5 years after it becomes certain that no * CGT event (or no further * CGT event) can happen such that the records could reasonably be expected to be relevant to working out whether you have made a * capital gain or * capital loss from the event. (2A) An offence under this section is an offence of strict liability. Note: For strict liability , see section 6.1 of the Criminal Code . (3) This section has effect despite subsection 262A(4) of the Income Tax Assessment Act 1936 (which requires records to be retained for a different period). (4) However, it is not necessary to retain records: (a) if the Commissioner notifies you that you do not need to retain them; or (b) for a company that has finally ceased to exist. Note 1: There are special record keeping rules where there has been a roll ‑ over for a merger between superannuation funds under former section 160ZZPI of the Income Tax Assessment Act 1936 : see section 121 ‑ 25 of the Income Tax (Transitional Provisions) Act 1997 . Penalty: 30 penalty units. Note 2: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 91 of 2000, effective Sch 2 (items 49–53), Sch 4A and Sch 5: 1 July 2000 (s 3(1), (6)) | Amended by No 146 of 2001, effective Sch 4 (items 92–101): 15 Dec 2001 (s 2(1)) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent

s 121-30 — Exceptions

(1) You do not need to keep records under section 121 ‑ 20 if: (a) for each * CGT event (if any) that has happened such that the records are relevant (or could reasonably be expected to be relevant) to working out whether you have made a * capital gain or * capital loss from the event; and (b) for each * CGT event that may happen in the future such that the records could reasonably be expected to be relevant to working out whether you might make a * capital gain or * capital loss from the event; any capital gain or capital loss you made (or might make) from it is to be (or would be) disregarded, except because of a roll ‑ over. (2) However, the exceptions in this section do not apply to a * CGT event as a result of which a * capital gain or * capital loss is disregarded under section 855 ‑ 40 (about capital gains and losses of foreign residents through * fixed trusts).

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 114 of 2000, effective Schedule 4 (items 43, 44): 1 July 1998 Remainder: Royal Assent | Amended by No 21 of 2005, effective 21 Mar 2005 | Amended by No 168 of 2006, effective Schedule 3 (items 3–5): 13 Dec 2005 Remainder: Royal Assent | Amended by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011

s 121-35 — Asset register entries

(1) You satisfy a requirement under this Division to retain records for a period if you: (a) retain for that period an entry in a register for the records that satisfies the requirements in subsection (2), or a combination of the records and such an entry for them, containing all the information required to be contained in the records; and (b) retain those of the records that contain the information entered in the register for at least 5 years after the requirement in paragraph (2)(b) is satisfied. (2) The requirements are: (a) you must make an entry in a register, in English, setting out some or all of the information contained in the records; and (b) another entity who is a * registered tax agent or some other person approved by the Commissioner must certify in the register that the information entered is information from those records. Income Tax Assessment Act 1997 No. 38, 1997 Compilation No. 266 Compilation date: 1 July 2026 Includes amendments: Act No. 17, 2025, Act No. 57, 2025, Act No. 49, 2026 and Act No. 58, 2026 This compilation is in 12 volumes Volume 1: Chapter 1, Part 1 ‑ 1 to Chapter 2, Part 2 ‑ 5 sections 1 ‑ 1 to 36 ‑ 55 Volume 2: Chapter 2, Part 2 ‑ 10 to Chapter 2, Part 2 ‑ 20 sections 40 ‑ 1 to 67 ‑ 30 Volume 3: Chapter 2, Part 2 ‑ 25 to Chapter 3, Part 3 ‑ 1 sections 70 ‑ 1 to 121 ‑ 35 Volume 4: Chapter 3, Part 3 ‑ 3 to Chapter 3, Part 3 ‑ 5 sections 122 ‑ 1 to 197 ‑ 85 Volume 5: Chapter 3, Part 3 ‑ 6 to Chapter 3, Part 3 ‑ 10 sections 200 ‑ 1 to 253 ‑ 15 Volume 6: Chapter 3, Part 3 ‑ 25 to Chapter 3, Part 3 ‑ 30 sections 275 ‑ 1 to 313 ‑ 85 Volume 7: Chapter 3, Part 3 ‑ 32 to Chapter 3, Part 3 ‑ 50 sections 315 ‑ 1 to 421 ‑ 85 Volume 8: Chapter 3, Part 3 ‑ 80 to Chapter 3, Part 3 ‑ 90 sections 615 ‑ 1 to 721 ‑ 40 Volume 9: Chapter 3, Part 3 ‑ 95 to Chapter 4, Part 4 ‑ 5 sections 723 ‑ 1 to 880 ‑ 205 Volume 10: Chapter 5, Part 5 ‑ 30 to Chapter 6, Part 6 ‑ 5 sections 900 ‑ 1 to 995 ‑ 1 Volume 11: Endnotes 1 to 3 Volume 12: Endnote 4 Each volume has its own contents About this compilation This compilation This is a compilation of the Income Tax Assessment Act 1997 that shows the text of the law as amended and in force on 1 July 2026 (the compilation date ). The notes at the end of this compilation (the endnotes ) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au). Application, saving and transitional provisions If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Presentational changes The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register. Self ‑ repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents

Amendment history: Inserted by No 94 of 1999, effective 16 July 1999 (s 2(1)–(3))

s 122-1 — What this Division is about

A roll ‑ over can delay the making of a capital gain or loss if: • you dispose of a CGT asset, or all the assets of a business, to a company in which you own all the shares; or • you create a CGT asset in such a company; or • all the partners in a partnership dispose of partnership property to a company in which they own all the shares; or • the partners create a CGT asset in such a company.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4))

s 122-5 — What this Subdivision is about

This Subdivision sets out when you can obtain a roll ‑ over if you transfer a CGT asset, or all the assets of a business, to a company. It also deals with the creation of a CGT asset in a company. There are consequences for the company also. Table of sections When is a roll ‑ over available 122 ‑ 15 Disposal or creation of assets—wholly ‑ owned company 122 ‑ 20 What you receive for the trigger event 122 ‑ 25 Other requirements to be satisfied 122 ‑ 35 What if the company undertakes to discharge a liability (disposal case) 122 ‑ 37 Rules for working out what a liability in respect of an asset is Replacement ‑ asset roll ‑ over if you dispose of a CGT asset 122 ‑ 40 Disposal of a CGT asset Replacement ‑ asset roll ‑ over if you dispose of all the assets of a business 122 ‑ 45 Disposal of all the assets of a business 122 ‑ 50 All assets acquired on or after 20 September 1985 122 ‑ 55 All assets acquired before 20 September 1985 122 ‑ 60 Assets acquired before and after 20 September 1985 Replacement ‑ asset roll ‑ over for a creation case 122 ‑ 65 Creation of asset Same ‑ asset roll ‑ over consequences for the company (disposal case) 122 ‑ 70 Consequences for the company (disposal case) Same ‑ asset roll ‑ over consequences for the company (creation case) 122 ‑ 75 Consequences for the company (creation case)

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4))

s 122-15 — Disposal or creation of assets—wholly ‑ owned company

If you are an individual or a trustee, you can choose to obtain a roll ‑ over if one of the * CGT events (the trigger event ) specified in this table happens involving you and a company in the circumstances set out in sections 122 ‑ 20 to 122 ‑ 35. Relevant * CGT events Event No. What you do A1 * Dispose of a CGT asset, or all the assets of a business, to the company D1 Create contractual or other rights in the company D2 Grant an option to the company D3 Grant the company a right to income from mining F1 Grant a lease to the company, or renew or extend a lease Note 1: The roll ‑ over starts at section 122 ‑ 40. Note 2: Section 103 ‑ 25 tells you when you have to make the choice. Note 3: A roll ‑ over may also be available under Subdivision 328 ‑ G (Restructures of small businesses). Example: Gavin runs a plumbing business. He wants to incorporate it so he disposes of all its assets to a company. He becomes the sole shareholder of the company.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 18 of 2016, effective 1 Apr 2016 (s 2(1) item 1)

s 122-20 — What you receive for the trigger event

(1) The consideration you receive for the trigger event happening must be only: (a) * shares in the company; or (b) for a * disposal of a * CGT asset, or all the assets of a business, to the company (a disposal case )—shares in the company and the company undertaking to discharge one or more liabilities in respect of the asset or assets of the * business (as appropriate). Note: There are rules for working out what are the liabilities in respect of an asset: see section 122 ‑ 37. (2) The * shares cannot be * redeemable shares. (3) The * market value of the * shares you receive for the trigger event happening must be substantially the same as: (a) for a disposal case—the market value of the asset or assets you disposed of, less any liabilities the company undertakes to discharge in respect of the asset or assets (as appropriate); or (b) for another trigger event (a creation case )—the market value of the CGT asset created in the company (the created asset ). (4) In working out if the requirement in paragraph (3)(a) is satisfied, if the * market value of the * shares is different to what it would otherwise be only because of the possibility of liabilities attaching to the asset or assets, disregard the difference. Note: The company may have to pay income tax if an amount is included in its assessable income because of a CGT event happening to an asset you disposed of, or it may have a liability because of accrued leave entitlements of employees. The market value of the shares will reflect these contingent liabilities.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 1, Sch 2 (items 4–48), Sch 3 (items 3–12), Sch 4 (items 2–11), Sch 5 (items 3–5), Sch 6 (items 2–7), Sch 7 (items 2–11), Sch 9 (items 2–6, 8) and Sch 10: 22 June 1998 (s 2(1)–(4)) | Amended by No 176 of 1999, effective Sch 3: 1 July 2000 (s 2(9)) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20)