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Edited version of private ruling

Authorisation Number: 1011496055983

Ruling

Subject: Fixed trust for the purposes of section 272-65 of Schedule 2F to the Income Tax Assessment Act 1936

Question 1

Is the Trust a fixed trust for the purposes of section 272-65 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2008

Relevant facts and circumstances

The scheme, the subject of this ruling, has been ascertained from the following documents;

The Trust is a unit trust which is a Managed Investment Scheme under Chapter 5C of the Corporations Act 2001.

Units in the Trust are stapled and are listed for quotation on the Australian Securities Exchange Limited ("ASX") and are traded as stapled securities. There are institutional and retail unit holders in the stapled trusts.

The Responsible Entity is the Responsible Entity of the Trust.

The principal investment of the Trust is in the units in another trust. In addition to its interest in 100% of the units in the other trust, the Responsible Entity, has made loans to entities in the stapled group and has funds invested in short-term cash deposits with banks.

Relevant legislative provisions

Income Tax Assessment Act 1936 Schedule 2F section 272-5

Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(1)

Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(3)

Income Tax Assessment Act 1936 Schedule 2F paragraph 272-5(3)(a)

Income Tax Assessment Act 1936 Schedule 2F paragraph 272-5(3)(b)

Income Tax Assessment Act 1936 Schedule 2F subparagraph 272-5(3)(b)(i)

Income Tax Assessment Act 1936 Schedule 2F subparagraph 272-5(3)(b)(ii)

Income Tax Assessment Act 1936 Schedule 2F subparagraph 272-5(3)(b)(iii)

Income Tax Assessment Act 1936 Schedule 2F-section 272-65

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

Issue 1

Question 1

Section 272-65 of Schedule 2F to the ITAA 1936 states that a trust is a fixed trust if persons have fixed entitlements to all of the income and capital of the trust.

The Constitution of the Trust contains certain clauses under which a unit holder's interest in a share of income, or of the capital, of the Trust may be rendered defeasible. Therefore, the Commissioner considers it reasonable to conclude, pursuant to the definition of 'fixed entitlement' under subsection 272-5(1) of Schedule 2F to the ITAA 1936, that the unit holders (or beneficiaries) do not have fixed entitlements to all of the income and capital of the Trust.

The Commissioner has given consideration to the requirements of subsection 272-5(3) of Schedule 2F to the ITAA 1936 and submission from the applicant. There is a reasonable case for the Commissioner to exercise the discretion under subsection 272-5(3) that the unit holders (or beneficiaries) of the Trust should be treated as having fixed entitlements to all of the income and capital of the Trust.

Therefore, the Trust is a fixed trust for the years of income ended 30 June 2009 to 30 June 2013, pursuant to the exercise of the Commissioner's discretion under subsection 272-5(3) of the ITAA 1936.

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