Income Tax Act 2007 section 257QH

Receipt of replacement value

Section 257QH allows an investor to preserve their Social Investment (SI) tax relief — which would otherwise be reduced or withdrawn because the investor received value from the social enterprise — provided that the full amount of that value is returned to the person who originally gave it.

• If an investor receives value from a social enterprise that would normally trigger a reduction or withdrawal of SI relief, that consequence can be avoided if replacement value of at least the same amount is given back
• The replacement value must flow from the original recipient (the person who received the value) back to the original supplier (the person who provided it), and the receipt must be a qualifying receipt
• Qualifying receipts include direct payments, purchasing assets from the original supplier at above market value, transferring assets to the original supplier at below market value, reversing the event that caused the original receipt, or repurchasing disposed-of investments at full value
• Certain routine commercial payments — such as arm's length payments for goods or services, reasonable interest on loans, market-value asset purchases, commercial rent, settlement of ordinary trade debts, and share purchases at fair value — are excluded and do not count as replacement value

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