Document ID: chunk:federal_register_of_legislation:C2025C00029:section:5:p4
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 5 (pt 4/20)
Character Range: 3696506–3699285

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.

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 a *complying superannuation entity, a *non‑complying superannuation fund or a *non‑complying approved deposit fund); 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 a qualified person in relation to the distribution for the purposes of Division 1A of former 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 an entity that is a *complying superannuation entity in relation to the income year in which the *distribution is made and is not