Income Tax Act 2007 section 785

Restriction on exemption: sales of future earnings

Section 785 restricts the going concern exemption under section 784 where the value of the business being sold is materially derived from the individual's future earnings or income from their occupation.

• Where a going concern's value is materially derived from the individual's prospective occupational income, the section 784 exemption is restricted to that portion of value
• The exemption only applies to the future-earnings element if the "future earnings condition" is met — meaning the individual will receive full consideration for the prospective income, ignoring capital amounts
• Full consideration can be received in any capacity — as a partner, employee, or otherwise
• References to income or receipts include payments for copyrights, licences, franchises, or other rights deriving value from the individual's activities, including past activities