Income Tax Act 2007 section 257QD

Cases where maximum SI relief not obtained

Section 257QD adjusts the calculation of value received where an investor has not been able to use the full amount of Social Investment (SI) relief available, typically because their income tax liability was too low to absorb it all.

• Where the actual tax reduction (Amount A) is less than the full SI relief available at the SI rate (Amount B), the value received figure ("V") used in withdrawal calculations is scaled down by the fraction A divided by B
• This adjustment ensures that investors are not penalised for receiving value from the social enterprise when they were unable to benefit from the full relief in the first place
• If the SI relief attributable to the investment was reduced before the relief was actually obtained, Amount A is treated as if that earlier reduction had not occurred — restoring it to its unreduced figure for the purposes of the calculation
• However, this restoration does not apply where the earlier reduction arose because of a corresponding issue of bonus shares under section 257N(5)