Income Tax Act 2007 section 257ML

The issue must be to raise money for chosen trade or preparing for it

Section 257ML requires that the social enterprise must be a party to the investment for the purpose of raising money to carry on a qualifying trade, or to prepare for one, and defines key terms used throughout the chapter.

• The social enterprise must issue the investment (other than bonus shares) to raise money for carrying on a qualifying trade already operated by it or its 90% social subsidiary, or for preparing to carry on a new qualifying trade that begins within two years of the investment date
• The legislation defines three key terms: the "funded purpose" (the reason the money is raised), the "chosen trade" (the qualifying trade in question), and "relevant preparation work" (preparations forming part of the activity of getting ready to trade)
• Where a 90% social subsidiary begins a qualifying trade, any trading activity it carried on before it became a 90% social subsidiary is ignored when determining whether the two-year deadline has been met
• This section does not apply where the social enterprise is an accredited social impact contractor