Income Tax Assessment Act 1936
If, under a trust instrument, a beneficiary has a vested and indefeasible interest in a share of income of the trust that the trust derives from time to time, or of the capital of the trust, the beneficiary has a fixed entitlement to that share of the income or capital. Case where interest not defeasible 272-5(2)
(a) a person holds units in a unit trust; and
(b) the units are redeemable or further units are able to be issued; and
(c) if units in the unit trust are listed for quotation in the official list of an approved stock exchange - the units held by the person will be redeemed, or any further units will be issued, for the price at which other units of the same kind in the unit trust are offered for sale on the approved stock exchange at the time of the redemption or issue; and
(d) if the units are not listed as mentioned in paragraph (c) - the units held by the person will be redeemed, or any further units will be issued, for a price determined on the basis of the net asset value, according to Australian accounting principles, of the unit trust at the time of the redemption or issue;
then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the person ' s interest, as a unit holder, in the income or capital of the unit trust is defeasible.Deemed fixed entitlement 272-5(3)
(a) a beneficiary with an interest in a share of income that the trust derives from time to time, or of the capital of a trust, does not have a fixed entitlement to the share; and
(b) the Commissioner considers that the beneficiary should be treated as having the fixed entitlement, having regard to:
(i) the circumstances in which the entitlement is capable of not vesting or the defeasance can happen; and
(ii) the likelihood of the entitlement not vesting or the defeasance happening; and
(iii) the nature of the trust;
the beneficiary has the fixed entitlement.
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