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Edited version of your written advice

Authorisation Number: 1012808598081

Ruling

Subject: 50% stake test

Question 1

Will the Commissioner exercise the discretion in subsection 272-30(3) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) to deem Listed Public Company as holding the whole of their fixed entitlements to a share of the income and capital of the trust as individuals and for the individual's own benefit?

Answer

Yes

Question 2

Does the Trust pass the 50% stake test in Subdivision 269-C of Schedule 2F to the ITAA 1936 at the relevant times during the test period?

Answer

Yes

This ruling applies for the following periods:

1 July 20XX to 30 June 20ZZ

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Trust is a unit trust.

Since the establishment of the Trust:

The Trust is an unlisted widely held trust as defined in section 272-110 of Schedule 2F to the ITAA 1936.

Ultimate beneficial ownership of the Trust

The Trust and the Unit Holder are indirectly wholly owned by Listed Public Company.

Listed Public Company has a market capitalisation of approximately $ Billion.

Tax losses

A tax loss was incurred by the Trustee in the income year ended 30 June 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1936 schedule 2F

Income Tax Assessment Act 1936 section 266-75

Income Tax Assessment Act 1936 section 266-90

Income Tax Assessment Act 1936 section 269-50

Income Tax Assessment Act 1936 section 269-55

Income Tax Assessment Act 1936 section 272-30

Reasons for decision

Question 1

The consideration of the exercise of the discretion in subsection 272-30(3) of Schedule 2F to the ITAA 1936

Subsection 272-30(3) of Schedule 2F to the ITAA 1936 is a concessional provision which relevantly exists to assist in tracing ownership interests through listed public companies. Such ownership interests can often prove difficult to trace due to the large number of shareholders and the likelihood that individuals will not hold shares in a listed public company directly.

The application of subsection 272-30(3) of Schedule 2F to the ITAA 1936

Subsection 272-30(3) of Schedule 2F to the ITAA 1936 relevantly provides the Commissioner with a discretion to treat all or part of the fixed entitlements in a trust as being held directly or indirectly, by a listed public company (per subsection 272-30) as being held by that trust as an individual for its own benefit. The Commissioner may exercise this discretion favourably where he considers it fair and reasonable to do so having regard to the matters set out in subsection 272-30(4) (per subsection 272-30(3)(b)).

In relation to the exercise of the Commissioner's discretion in subsection 272-30(3), the following comments are made:

Having regard to the matters set out in subsection 272-30(4) of Schedule 2F to the ITAA 1936 the Commissioner considers it fair and reasonable to treat Listed Public as holding the whole of its fixed entitlement as an individual and for the individual's own benefit for the purposes of subsection 272-30(3) for each test time which occurs within the ruling period.

Question 2

Does the Trust pass the 50% stake test?

The relevant times at which the % stake test is required to be passed by a trust is determined by the conditions which apply to that particular type of trust.

In the case of the Trust, it is an 'unlisted widely held trust'. As such the conditions which the Trust must satisfy are contained within section 266-75 of Schedule 2F to the ITAA 1936 and are as follows:

Subsection 266-90(1) of Schedule 2F to the ITAA 1936 relevantly provides:

Section 269-50 of Schedule 2F to the ITAA 1936 defines the term 'more than a 50% stake' in relation to the income and capital of a trust:

Section 269-55(1) of Schedule 2F to the ITAA 1936 defines the term 'passes the 50% stake test:

In respect of answering the question of whether the Trust passes the 50% stake test in Subdivision 269-C of Schedule 2F to the ITAA 1936 at the relevant times during the test period the following comments are made:

As such, the Trust will pass the 50% stake test in section 269-55 of Schedule 2F to the ITAA 1936 for the relevant years of income as, at all relevant times, the same individual (Listed Public Company) has more than a 50% stake in the income and capital of the Trust.


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