• Non-resident trusts exempt from interest charges

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    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.

    Last modified: 04 Feb 2010QC 21777