Document ID: chunk:federal_register_of_legislation:C2010C00604:clause:27_5:p4
Version: federal_register_of_legislation:C2010C00604
Segment Type: clause
Provision Reference: sch 27 cl 5 (pt 4/5)
Character Range: 383629–386379

The venture capital credit on a distribution is only significant in the hands of a relevant venture capital investor (basically a superannuation fund or other entity that deals with superannuation).

 (2) That investor receives a tax offset. In most cases, this will be equal to the venture capital credit.

 (3) Under section 124ZM of the Income Tax Assessment Act 1936, that part of the distribution that is franked with a venture capital credit is also treated as exempt income in the hands of the entity.

210‑165  Recipients for whom the venture capital credit is not significant

 (1) For other entities, the fact that all or part of the franking credit on a distribution is also a venture capital credit can be ignored.

 (2) The franking credit will either generate a gross‑up of the entity's assessable income and a corresponding tax offset under Division 207 or, if the right to make an election under section 124ZM of the Income Tax Assessment 1936 is exercised, the franked part of the distribution will be treated as exempt income.

 (3) The unfranked part of the distribution is treated as exempt income under section 124ZM of the Income Tax Assessment Act 1936.

[This is the end of the Guide.]

Operative provisions

210‑170  Tax offset for certain recipients of distributions franked with venture capital credits

 (1) The recipient of a *distribution *franked with a venture capital credit is entitled to a *tax offset for the income year in which the distribution is made if:
 (a) the recipient is a relevant venture capital investor; and
 (b) the recipient is not:
 (i) a *partnership; or
 (ii) a trustee (other than the trustee of an eligible entity within the meaning of Part IX of the Income Tax Assessment Act 1936); and
 (c) the recipient satisfies the *residency requirement for an entity receiving a distribution; and
 (d) the distribution is not *exempt income of the recipient (ignoring section 124ZM of the Income Tax Assessment Act 1936); and
 (e) the recipient is not a qualified person in relation to the distribution for the purposes of Division 1A of Part IIIAA of the Income Tax Assessment Act 1936; and
 (f) the distribution is not part of a *dividend stripping operation; and
 (g) the Commissioner has not made a determination under paragraph 204‑30(3)(c) that no *imputation benefit is to arise for the receiving entity in respect of the distribution; and
 (h) the Commissioner has not made a determination under paragraph 177EA(5)(b) that no imputation benefit is to arise in respect of the distribution to the recipient.

Relevant venture capital investors

 (2) The following entities are relevant venture capital investors:
 (a) the trustee of a fund that is a *complying superannuation fund in relation