Public unit trusts
The transferor trust measures do not apply to arm's length transfers to non-resident public unit trusts. [sub-subparagraph 102AAT(1)(a)(i)(B)]
From the 1992–93 income year you have been exempt from an interest charge on amounts received, or which have been applied for your benefit, that are attributable to the income or profits of a non-resident trust estate which at all times during the year was:
- a public unit trust under the transferor trust measures [Division 6AAA], and
- not a CFT within the meaning of Part X. [subsection 102AAM(1C)]
A unit trust will be a public unit trust if, at any time during the year, any of the units in the unit trust were listed on a stock exchange in Australia or elsewhere or were offered to the public.
In addition, a unit trust will be a public unit trust if, at all times during the year, the units in the unit trust were held by 50 or more persons. A unit trust will not be treated as a public unit trust where 20 or fewer persons hold 75% or more of the beneficial interests of the income or property of the trust. [subsections 102AAF(2) and 102G(3)]
You must take the following into account when deciding whether a unit trust is a public unit trust at all times during the year of income:
- An entity and its associates are taken to be one person.
- Where units in the trust are held by the trustee of another trust estate that is a public unit trust at all times during the income year, a person who has a beneficial interest in the second trust estate is taken to hold those units. [subsection 102AAF(3)]
A public unit trust cannot also be a CFT. A trust estate will be a CFT if there is an eligible transferor in respect of the trust - that is, if an Australian entity or a controlled foreign partnership, CFT or CFC transferred value to the trust estate:
- in the case of a discretionary trust estate, at any time [section 347]
- in the case of a non-discretionary trust estate, after 12 April 1989 for non-arm's length consideration. [sections 342 and 348]
A trust estate will also be a CFT if there is a group of five or fewer Australian entities with a 1% interest in the trust estate totalling 50% or more. [section 342]
When you are working out if an Australian entity has a 1% interest in the trust, include the direct and indirect interests of the entity's associates in the same trust or trusts.
Generally, where property of a trust estate is paid to or applied for the benefit of a beneficiary, an amount - unless it has already been taxed in the hands of the trustee or beneficiary - is included in the assessable income of that beneficiary. Under those circumstances, an interest charge usually applies to amounts that are included in the assessable income of that beneficiary. [sections 99B and 102AAM]
However, since the 1992–93 income year, a beneficiary has been exempt from the interest charge on amounts received from the estate of a deceased person where those amounts are paid to, or applied for the benefit of, the beneficiary within three years after the death of that person. [subsection 102AAM(1B)]