Separate tax file number (TFN) for the sub-trust
As a general rule, where a trustee who invests the funds in the sub-trust using either Options 1 or 2 in PS LA 2010/4 and satisfies the exemptions in paragraphs 72 and 84 of PS LA 2010/4 will not need to apply for a separate TFN for the sub-trust.
Separate trust deed for the sub-trust
There is no need to have a separate trust deed for the sub-trust. Indeed many trust deeds already provide for the creation of a sub-trust. We strongly recommend you carefully read your trust deed before creating a sub-trust, to ensure it is within the trustee's powers to do so.
Trust deed silent on UPE to be held on sub-trust
As long as the trust deed contains words to the effect that the trustee has the power to set aside the income of the trust for the exclusive benefit of one or all of the beneficiaries, then we will consider that the trustee has the power to hold the UPE on sub-trust for the private company beneficiary. If the UPE has been set aside in a manner consistent with paragraphs 50 to 53 of PS LA 2010/4, then we will consider (subject to evidence to the contrary) that the UPE is held on sub-trust.
Separate financial accounts or tax return
As a general rule, a sub-trust is a trust estate and would ordinarily be required to lodge a tax return. However, we do not require a sub-trust to create separate sub-trust financial accounts or lodge a separate sub-trust tax return when the trustee decides to place the UPE on a sub-trust and the sub-trust invests all of its funds using either Options 1 or 2 as long as the conditions in paragraphs 72 and 84 of PS LA 2010/4 are satisfied.
This is on the basis that both Options 1 and 2 are interest only investment options involving one payment of annual return each year and the obligation to repay the UPE at the end of the investment period (of 7 or 10 years). These transactions should be easily visible from the financial accounts of the main trust and of the private company beneficiaries.
We are not aware of any specific accounting requirement for how the main trust should account for the sub-trust.
Where there is no requirement to produce separate accounts for the sub-trust, and the sub-trust has invested the funds representing the UPE back into the main trust under Options 1 or 2 set out in PS LA 2010/4, it is expected that the main trust would reflect its obligation to repay the money owing to the sub-trust within the liability section of its statement of financial position or balance sheet.