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ATO Interpretative Decision

ATO ID 2003/800

Income Tax

Associates: A partnership as an associate of a natural person
FOI status: may be released
  • This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a partnership, in which a company acting as trustee is a partner, an associate of shareholders of that company where the shareholders are natural persons?

Decision

No. A partnership, in which a company acting as trustee is a partner, is not an associate of shareholders of that company where the shareholders are natural persons.

Facts

A Pty Ltd ('the company') is trustee of the B trust ('the trust').

The company has two shareholders ('the shareholders'). The shareholders are natural persons.

The company and the shareholders are beneficiaries of the trust.

The company, as trustee of the trust, is a partner ('the partner') in D ('the partnership').

The other partner is otherwise unrelated to the company, the trust and the shareholders.

Reasons for Decision

As the shareholders of the company are natural persons, subsection 318(1) of the Income Tax Assessment Act 1936 (ITAA 1936) is relevant.

Under subsection 318(1) of the ITAA 1936 the associates of a natural person (other than in the capacity of trustee) are:

(a)
a relative
(b)
a partner of the person or a partnership in which the person is a partner
(c)
if a partner of the person is a natural person otherwise than in the capacity of trustee - the spouse or a child of that partner
(d)
a trustee of a trust where the person, or another entity that is an associate of the person because of another paragraph of subsection 318(1), benefits under the trust, or
(e)
a company which is controlled by the person.

The relevant paragraph is paragraph 318(1)(b) of the ITAA 1936. As the shareholders are not partners in the partnership, the partnership is not an associate of the shareholders under paragraph 318(1)(b) of the ITAA 1936.

Amendment History

Date of Amendment Part Comment
24 August 2015 Related ATO IDs Removed section.
Reference number Added Siebel reference.

Date of decision:  30 June 2003

Year of income:  Year ended 30 June 2003 Year ending 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   subsection 318(1)

Keywords
Associate
Partnerships

Siebel/TDMS Reference Number:  TDMS 3523243; 1-5TGFH9M; 1-DCEHEHF

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  5 September 2003
Date reviewed:  7 December 2017

ISSN: 1445-2782

history
  Date: Version:
  30 June 2003 Original statement
You are here 24 August 2015 Updated statement

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