ATO Interpretative Decision
ATO ID 2005/276
Income Tax
Trust Losses - Control Test - Resignation of one director of corporate trusteeFOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Current
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does a group begin to control a non-fixed trust for the purposes of section 267-45 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) where a person ceases directorship of the corporate trustee but continues to control the trust as part of the original group?
Decision
No. Provided the cessation of directorship does not trigger the materialisation of a 'new' group that begins to control the trust directly or indirectly.
Facts
A and B are the joint directors of the corporate trustee of a non-fixed trust. As directors of the trustee company, A and B comprise the 'group' that controls the trust as defined by subsection 269-95(1) of Schedule 2F to the ITAA 1936 immediately prior to the test period. During the test period, B resigns directorship of the trustee company leaving A as the sole director. B continues to exercise the same amount of control of the trust before and after ceasing directorship of the corporate trustee. The control of the trust by the group remains unchanged in every aspect, notwithstanding this, the validity of the trust is preserved.
Reasons for Decision
Section 267-45 of Schedule 2F to the ITAA 1936 provides that a group must not begin to control the trust directly or indirectly during the test period (from the beginning of the loss year until the end of the income year).
A group controls a non-fixed trust pursuant to subsection 269-95(1) of Schedule 2F to the ITAA 1936. Group is defined in subsection 269-95(5) of Schedule 2F to the ITAA 1936 as a person, or a person and one or more associates, or two or more associates of a person.
As B continues to exercise the same amount of control of the trust before and after ceasing directorship of the corporate trustee, a group as defined by subsection 269-95(5) of Schedule 2F to the ITAA 1936, which differs from the original group, has not formed upon the resignation of B. Accordingly, no group begins to control the trust during the test period and section 267-45 of Schedule 2F to the ITAA 1936 will not apply.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 19 December 2014 | Issue | Change reference to section 269-95 to 267-45 of Schedule 2F to the ITAA 1936 |
| Facts | Remove reference to subsection 269-95(1) in the third paragraph | |
| Reasons for Decision | Remove references to subsection 269-95(1) and reword the last sentence in the last paragraph |
Year of income: Year ended 30 June 2005
Legislative References:
Income Tax Assessment Act 1936
Schedule 2F
section 267-45
section 269-95
subsection 269-95(1)
subsection 269-95(5)
Keywords
Change in control
Control of a non fixed trust test
Trust loss tests
Trust losses
Date reviewed: 27 February 2018
ISSN: 1445-2782
| Date: | Version: | |
| 4 October 2005 | Original statement | |
| You are here → | 19 December 2014 | Updated statement |