Edited version of your private ruling

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Ruling

Subject: Commissioners discretion

Non-arm's length income

Questions

1.Does a superannuation fund (the Fund), as a beneficiary of a service trust (the Service Trust), have a fixed entitlement to a share of the income and/or capital of the Service Trust under subsection 272-5(1) of Schedule 2F to the Income Tax Assessment Act 1936 (the ITAA 1936)?

2.If the answer to question 1 is 'no', will the Commissioner exercise the discretion under subsection 272-5(3) of Schedule 2F to the ITAA 1936 to deem a beneficiary of the Service Trust as having a fixed entitlement to the share of the income and/or capital of the Service Trust?

3.Will the income derived by the Fund from the Service Trust, as a beneficiary of the Service Trust, be non-arm's length income of the Fund under section 295-550 of the Income Tax Assessment Act 1997?

Advice/Answers

1.No.

2.No.

3.Yes.

This ruling applies for the following periods:

Income year ended 30 June 2012 and later income years

The scheme commences on:

During the 2010-2011 income year

Relevant facts and circumstances

The Fund is a single-member complying superannuation fund with a corporate trustee (the Fund Trustee). The member of the Fund (the Fund Member) is the sole director of the Fund Trustee.

The Service Trust was constituted in the early 1990s by a deed of settlement (the original deed) and has been conducted by a corporate trustee (the Trustee) as a service entity that provides administration services and premises for its Members, who are practitioners in a specified profession. None of the Members are related parties in relation to each other. None of the Members, or their Eligible Beneficiaries, are related parties of the Service Trust or the Trustee.

The original deed was amended subsequently by a number of supplemental deeds made in the mid-1990s and the late 2000s. Provisions under the original deed and the supplemental deeds (the Deed, collectively) relevant to this private ruling are noted as follows:

1.The Trustee does not have any general charitable intent in making the Service Trust.

2.Until the Vesting Day the Trustee will hold and stand possessed of the corpus and net income of the Trust Fund upon trust for the Eligible Beneficiaries of the Members and for Distribution amongst the Eligible Beneficiaries in relation to each Member in the Membership Proportion of that Member.

3.The beneficial interest in the Trust Fund will be vested in the Original Members and the other Persons who subsequently become registered as the Members.

4.The Trustee may admit any Original Member or Prospective Member (the "Applicant") as a Member of the Service Trust if:

(a) the Applicant applies to the Trustee for membership;

(b) every member agrees to admit the Applicant as a Member of the Service Trust;

(c) the Applicant is a professional carrying on activities on the premises of the Service for a specified minimum period of time;

(d) the Applicant has executed, and delivered to the Trustee, a Service Agreement and a Bond Agreement; and

(e) the Applicant has paid the specified Bond amount and Premium amount to the Trustee.

5. Membership of the Service Trust will be suspended when any of the events specified in the Deed occurs, including:

(a) cessation of services by a Member with the Service Trust for a specified maximum period of time; and

(b) a Member providing services other than with the Service Trust.

7. Upon termination of a Member's membership of the Service Trust, the Trustee will:

(a) make an interim distribution of the net income, or a part thereof, derived since the commencement of the accounting period to the Eligible Beneficiaries of the outgoing Member in the amounts and proportions amongst those Eligible Beneficiaries that the Trustee in its absolute and uncontrolled discretion thinks fit;

(b) repay the Bond amount to the outgoing Member; and

(c) pay to the outgoing Member the balance of the outgoing Member's Premium Account balance at that time.

8. At any time and from time to time before the Vesting Day the Trustee may distribute the corpus of the Trust Fund comprising the Premium Account of each Member (other than a suspended Member) for the time being in excess of the immediate requirements of the Service Trust to the Eligible Beneficiaries of that Member. The Eligible Beneficiaries receiving each distribution made to them will hold and enjoy the same freed from the trusts and powers contained in the Deed.

9. The Trustee will collect, receive and get in the gross income and profits delivered from time to time during each accounting period from dividends, interest, rents and other income and profits of the Service Trust and will pay out of the gross income of the Trust Fund all costs and outgoings.

10. The Trustee will, on the last day of each accounting period, hold and stand possessed of the whole of the net income of the accounting period for the Eligible Beneficiaries in relation to each Member and in the Membership Proportion of that Member in the amounts and proportions amongst those Eligible Beneficiaries as the Trustee in its absolute and uncontrolled discretion thinks fit.

11. At any time and from time to time before the Vesting Day the Trustee may by supplemental deed revoke, resettle, add to or vary all or any one or more of the provisions of the Deed, and such variations may provide, amend, vary or modify the administrative discretions and powers for the time being vested in the Trustee. However, no supplemental deed is effective until the Members approve any variations by Special Resolution.

Some of the expressions used in the Deed are defined in the Deed. Of relevance are the following:

"Distribute" in relation to corpus or net income of the Service Trust means to pay set aside or make over Property comprised in or forming a constituent part of the corpus or the net income (as the case may be) to or for the Eligible Beneficiaries of a Member for their own use and enjoyment beneficially and absolutely AND without limiting the generality of the foregoing the expression extends to and includes:

a declaration made by the Trustee that it holds and stands possessed of the net income or corpus (as the case may be) specified in the resolution for and on behalf of those Eligible Beneficiaries selected by the Trustee; and

an irrevocable written resolution of the Trustee vesting an indefeasible and absolute interest in the net income or corpus (as the case may be) specified in the resolution in favour of the Eligible Beneficiaries selected by the Trustee;

"Eligible Beneficiaries" in relation to each Member means:

· that Member; and

· the Associate thereof; or

· some one or more of them selected by the Trustee to receive a Distribution pursuant to the trusts and powers expressed or implied in this Deed;

· "Associate" in relation to a Member and relevant to this private ruling means any one or more of:

· (in the case of a Member which is a company) the Member Principal;

· the Specified Relatives of the Member or, (in the case of a Member which is a company) the Member Principal;

· the Trustee (in its capacity as trustee) of any Sub-Trust for the Member or Member Principal or a Specified Relative thereof;

· any company in which a Member or Member Principal or Specified Relative thereof is an officer or shareholder;

· any Person who is an officer or a shareholder of a company;

· any Person who is an associate of the Member or Member Principal or Specified Relative thereof within the meaning of subsection 82KH(1) of the Income Tax Assessment Act 1936 or would be an associate as so defined as if a reference to a "taxpayer" in that definition were a reference to the Member or Member Principal or Specified Relative thereof respectively;

· "Bond" in relation to a Member means a specified amount from time to time determined by the Trustee being an amount to be paid by a Prospective Member or an Original Member to the Trustee upon the terms of the Bond Agreement as a condition of membership;

· "Bond Agreement" means a deed in the specific form executed by the Prospective Member and the Trustee;

· "Corpus" means the property comprising capital including accumulations and premiums of the Trust Fund, or a part thereof, but does not include net income;

· "Member" at any time means either an Original Member, or a Prospective Member, who is approved for Membership by the Trustee and who has satisfied the conditions specified for admission to Membership of the Service Trust;

· "Member Principal" in relation to a corporate Member means the natural person who is an officer of and shareholder in that Member and is employed by that Member in the Practice

· "Membership" means the rights benefits and privileges vested in a Member under and pursuant to the Deed;

· "Membership Proportion" at any time in relation to a Member (other than a suspended Member, a winding down Member, an extended leave Member or an extended sick leave Member) means the proportion calculated by dividing 1 by the aggregate number of Members (other than suspended Members, winding down Members, extended Leave Members or Extended Sick Leave Members) at that time

"Net Income" in relation to an accounting period or part thereof means:

· the total of net profit together with the gross income (less all losses and outgoings and other charges in relation thereto) derived by the Trustee in the accounting period or part thereof (as the case may be) calculated in accordance with generally accepted accounting methods and standards, the ITAA 1936 and other accounting method or procedure (if any) from time to time declared by the Trustee to be the method or procedure by which the net income of the Service Trust is to be calculated; and

· all corpus and accretions thereto that are required to be included in the assessable income of the Service Trust pursuant to the provisions of section 160ZO of the ITAA 1936

· but unless otherwise determined 'net income' shall be fixed and calculated in accordance with and pursuant to section 95 of the ITAA 1936;

· "Original Member" at any time means a Person who is named and described in the relevant schedule to the Deed, meets the criteria for eligibility for Membership in the Service Trust, is and remains a Member of the Trust Fund;

· "Person" includes a partnership and a Company and a trustee of any trust estate or settlement;

· "the Practice" in relation to a Member means the practice specified in the Deed and the further or other activities and undertakings agreed to from time to time by the Trustee in relation to that Member;

· "Premises" at any time in relation to a Member means the premises specified in the Deed and the further or other places (if any) agreed to by the Trustee and the Member to be the place at which the Member carries on his or her Practice at that time;

· "Premium" at any time in relation to a Prospective Member means the specified amount in the deed determined from time to time by the Trustee to be paid by a Prospective Member to the Trustee as a condition of Membership of the Service Trust;

· "Premium Account" at any time in relation to a Member means the account of that Member in relation to the share of Premiums with other Members;

· "Property" includes cash investments and other assets and property whether real or personal legal or equitable and whether corporeal or incorporeal; and without limiting the generality of the foregoing expression includes legal and equitable choses in action and the goodwill of any business;

· "Prospective Member" at any time means a Person who is not an Original Member or existing Member and proposes to be a Member by making application to the Trustee;

· "Special Resolution" means a resolution proposed as special business at a duly convened general meeting of Members and passed by not less than the specified majority percentage of the votes cast by the Members present and entitled to vote on the resolution either:

· on a show of hands; or

· on a poll in the manner and the numbers provided in the Deed;

· as the case may be;

· "Specified Relatives" in relation to a Member or Member Principal means the parents grandparents, brothers, sisters, spouses, widows, widowers, children and grandchildren of the Member. It also includes the brothers, sisters, spouses, widows, widowers, children and grandchildren of the foregoing. Further, a reference to a child shall be deemed to include a reference to an adopted child and a reference to a grandchild shall be deemed to include the child or adopted child of a child;

· "Vesting Day" means:

· the day next preceding the 80^th anniversary of the date of delivery of the Deed; or

· the day next preceding the 21^st anniversary of the date of the death of the last survivor of the linear descendants now living of Her Majesty Queen Elizabeth II;

· whichever occurs first, but if the Trustee nominates an earlier date to be the Vesting Day then that date;

· The Service Trust had a specified number of Members immediately prior to the Fund Member being admitted to the Service Trust as a Member. Of these Members a specified number are directors of the Trustee. The Fund Member is not a director of the Trustee. Each Member (the Fund Member included) holds a specified number of shares, legally and beneficially, in the Trustee, and each Member's Membership Proportion in the Trust is an identical specified percentage.

From what was disclosed in the Service Trust's financial statements, it would appear that:

(a) the Members of the Service Trust were individual Members, or Member Principals of corporate Members, of the Service Trust;

(b) the Beneficiaries of the Service Trust were these Members and/or the Associates of these Members nominated, being family trusts, companies, services trusts and individuals; and

(c) most of the Service Trust's income was Service Fees collected from Members against which was offset the Service Trust's total expenses leaving net income available for distribution to the Beneficiaries Accounts.

Having been an Associate of the Trustee for a period of time, the Fund Member applied to the Trustee in writing during the 2010-11 income year to become a Member of the Service Trust. To meet one of the admission requirements the Fund Member executed a month later a Service Agreement (the Service Agreement), which was to commence in the first quarter of the 2011-12 income year.

Prior to becoming a Member of the Service Trust, the Fund Member carried on a practice as an employee of the Fund Member's own company. The Fund Member also worked as an employee elsewhere and as a partner in a partnership elsewhere.

Provisions in the Service Agreement relevant to this private ruling are noted as follows:

The Fund Member (the Practitioner) and the Trustee of the Service Trust (the Service Company) are parties to the Service Agreement;

The Service Company will provide management and clerical services and certain limited equipment pertaining to the Practitioner's profession and the Premises described in the Service Agreement to the Practitioner for use in the Practice;

The Service Company will provide various services which include:

(a) cleaning services in respect of the Premises;

(b) promptly reporting to the Practitioner of all material matters and things concerning the Practice;

(c) supplying the services of efficient and competent non-professional staff to the Practice including clerical and administrative staff;

(d) compliance with all laws and awards relating to all employment contracts;

(e) maintaining proper policies of workers' compensation; and

(f) supplying to the Practitioner the additional substitute temporary or other staff (if any) reasonably requested by the Practitioner;

(g) office services reasonably required by the Practitioner in connection with the conduct of the Practice including:

(1) purchasing and delivering of all stationery and other office and basic equipment pertaining to the Practitioner's profession;

(2) payment of all electricity, water, gas, insurance and other bills incurred in the conduct of the Practice;

(3) proper credit control to recover the professional fees and book debts of the Practitioner; and

(4) cleaning and laundry services in and around the Premises and to all fixtures;

(h) provision of any working area forming part of the Premises exclusively for the use of the Practitioner provided the Practitioner has given reasonable notice to the Service Company of the time and duration of the proposed use of that working area;

The Practitioner will pay service fees to the Service Company;

The service fees payable by the Practitioner in respect of each month to the Service Company will be calculated as follows:

(a) in respect of staff services an amount equal to a specified marked-up percentage of salaries and wages incurred in respect of the provision of clerical and administrative staff;

(b) in respect of the provision of a working area to the Practitioner an amount equal to a specified marked-up percentage of a proportion of the aggregate of:

(1) the reasonable cost to the Service Company in that month of supplying working areas to the practitioners;

(2) the cost of occupancy of those working areas in that month;

which proportion will be determined by dividing the number 1 by the number of persons (including the Practitioner) who are licensed by the Service Company to occupy and use the working areas;

(c) an amount equal to a specified percentage of the amount of the total professional fees of all practitioners carrying on practice at the premises collected by the Service Company in the month, divided by the number of practices to which those professional fees relate;

(d) in respect of other services not already mentioned, an amount equal to a specified marked-up percentage of the cost to the Service Company of providing those services or another rate (if any) agreed to by the parties;

The Practitioner will pay the service fees to the Service Company within a specified period after receipt of a monthly account delivered to the Practitioner by the Service Company in respect of services provided by it to the Practitioner during the month to which the account relates;

The Practitioner must maintain current registration with the relevant professional body and have appropriate professional indemnity insurance, the evidence of which must be lodged with the Service Company.

You confirmed that each practitioner is charged the same amounts of service fees under the Service Agreement. You also confirmed that the amount of professional fees collected by the Service Company may differ from practitioner to practitioner and that each practitioner pays an amount equal to a specified percentage of the average amount of professional fees collected per practitioner.

Some of the expressions defined in the Service Agreement and relevant to this private ruling are noted as follows:

· Practice means the practice in the specified profession carried on or to be carried on by the practitioner;

· Professional Fees means the fees charged for the services of a practitioner in his or her duties as practitioner;

· Service Fees means the fees payable by the Practitioner to the Service Company for the Services provided to the Practitioner being the fees calculated in accordance with the Service Agreement and payable at the times and in the manner provided in the agreement;

· Services in relation to the practice means the general services, the staff services, the office services and any other services functions and duties from time to time agreed to by the parties;

· Trust Deed means the Deed.

As noted before, apart from executing and delivering to the Trustee a Service Agreement, the other admission requirements are the execution of a Bond Agreement and the payment by a Prospective Member of the specified bond amount and premium amount to the Trustee.

Although only a specimen Bond Agreement was provided to us, based on what is stated in your private ruling application, we accept that the Fund Member has executed the requisite Bond Agreement in accordance with the requirements for admission to the Service Trust as a Member.

From the specimen Bond Agreement the following provisions are noted:

· The Trustee and the Fund Member (the Prospective Member) are the parties.

· The Prospective Member wishes to become a Member of the Service Trust;

· It is a pre-condition of becoming a Member of the Service Trust that a person will first pay to the Trustee the specified bond amount and non-refundable premium amount;

· The Prospective Member has paid to the Trustee the specified bond amount and premium amount and the Trustee has accepted those monies.

In consideration of the payment of the bond and the premium the Trustee agrees to admit the Prospective Member to membership of the Service Trust from the specified date;

The Prospective Member agrees to become a Member of the Service Trust;

The Trustee acknowledges to the Prospective Member:

(a) that the statements made in the Bond Agreement are true and correct;

(b) the receipt of the bond and premium paid by the Prospective Member; and

(c) that the Prospective Member has satisfied the pre-conditions of membership of the Service Trust.

Under the Deed, an applicant for membership of the Service Trust is required to pay the bond and the premium. It is noted from your letter to the Australian Taxation Office (the ATO) that:

[The Fund Member] has not paid any amount in [their] own personal capacity to meet the requirements of the Deed of the Trust, or otherwise, in connection with [their] involvement with the Trust.

It is also noted from your private-ruling application that the Fund has paid the bond and the premium, as per the following:

On the facts [the Fund Member] has created, by agreement with the Trustee, a fixed and indefeasible interest in the Trust in favour of [the Fund]. That fixed entitlement is evidenced by:

… the consideration provided by [the Fund] by way of payment of Bond and the Premium (total of [a specified amount] invested, or, to be invested)

In your letter to the ATO, you advised that:

The additional [a specified amount] investment in connection with the Fund's interest in the Trust has arisen by way of a loan account entry being a contribution to the Trust's working capital. We understand the other unitholders in the Trust will have made like investments at one time or another.

In the fourth quarter of the 2010-11 income year, a Deed Poll was executed by the Fund Member both in his/her capacity as the Applicant for membership of the Service Trust and in his/her capacity as the sole director and sole company secretary of the Fund Trustee. Under the Deed Poll the Fund Trustee was nominated as the Fund Member's associate for the purpose of receiving all distributions from the Service Trust in relation to the Fund Member's membership with the Service Trust.

The following was noted, among other things, from the Deed Poll:

Parties

BY [The Fund Member] (Applicant) and [the Fund Trustee] as trustee of [the Fund] (Nominee)

TO [The Trustee] as trustee of [the Service Trust]

Introduction

A. The Applicant has requested that upon [him/her] becoming a member of the Trust all distributions of corpus or income be paid to the Nominee on the basis that the Nominee will be an Associate (as defined in the trust deed constituting the Trust) of the Applicant when the Applicant becomes a member of the Trust.

B. [The Service Trust] has agreed to the request of the Applicant referred to in paragraph C above.

Operative clauses

1. Acknowledgements

1.1 The Applicant acknowledges and agrees that:

(a) the Applicant and the Nominee have received and relied on their own advice (and not on any advice from [the Service Trust]) that the Nominee is an Associate of the Applicant within the meaning of the deed constituting the trust (Trust Deed) and on the taxation consequences of distributions being made by [the Service Trust] to the Nominee (including the consequences in the event that the Nominee is not an Associate and whether or not distributions will be special income for tax purposes

(b) [The Service Trust] is relying on this deed in treating the Nominee as an Associate within the meaning of the Trust Deed; and

(c) The execution of this deed by the Applicant and the Nominee constitutes a direction by the Applicant to pay all distributions, in respect of the Trust in relation to the Applicant, to the Nominee until otherwise directed in writing by the Applicant.

2. Release

The Applicant and the Nominee each release [the Service Trust] from any action, demand, cost, liability or loss…in respect of the Nominee not being an Associate within the meaning of the Trust Deed or in respect of the taxation treatment of any distributions from [the Service Trust] to the Nominee.

In your letter to the ATO, you advised that:

The Fund is said to be "an associate" of [the Fund Member] by reference to the relevant clause of the Deed of the Trust. The Fund is "an associate" of [the Fund Member] by virtue of the sub-paragraph (a)(iv) definition in section 82KH [of the] ITAA 1936. That is to say that the Fund is considered to be a trustee of a trust estate, under which [the Fund Member] benefits or is capable of benefiting.

On this basis the Fund purports to be an Eligible Beneficiary of the Service Trust, to whom the Trustee may distribute the corpus and/or net income of the Service Trust pursuant to the Deed.

Relevant legislative provisions

Corporations Act 2001; Chapter 5C

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(2)

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

Income Tax Assessment Act 1997 Schedule 2F, Section 272-65

Income Tax Assessment Act 1997 Section 295-545

Income Tax Assessment Act 1997 Section 295-545

Income Tax Assessment Act 1997 Subsection 295-545(2)

Income Tax Assessment Act 1997 Subsection 295-545(3)

Income Tax Assessment Act 1997 Section 295-550

Income Tax Assessment Act 1997 Subsection 295-550(5)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1997 Section

Income Tax Rate Act 1986 Subsection 26(1)

Superannuation Industry (Supervision) Act 1993 Subsection 65(1)

Reasons for decision

Summary of decision

As an Eligible Beneficiary of the Service Trust, the Fund does not have a fixed entitlement to the corpus or net income of the Service Trust due to the provisions in the Deed that governs the Service Trust. Consequently, any income derived by the Fund from the Service Trust is non-arm's length income of the Fund.

After considering the factors under the income tax legislation, we are of the view that it is not reasonable for the Commissioner to exercise his discretion under that subsection to treat the Eligible Beneficiaries of the Trust as having fixed entitlements to a share of the income and capital of the Service Trust.

Even if the Fund does have a fixed entitlement, any income derived by the Fund from the Service Trust by reason of such an entitlement will be non-arm's length income of the Fund because:

(a) the income is considered to be derived under a scheme some parties to which were not dealing with each other at arm's length; and

(b) the amount of income so derived is more than the amount that the Fund might have been expected to derive if those parties had been dealing with other at arm's length.

The fact that the Fund paid for the Bond and the Premium and provided a loan to the Service Trust in the Fund Member's stead does not make the dealing between the Member of the Service Trust and the Fund Trustee an arm's length dealing. Rather, it was a non-arm's length dealing in itself.

Detailed reasoning

Non-arm's length income of superannuation fund

Subdivision 295-H of the ITAA 1997 deals specifically with the taxation of superannuation funds and other related entities. Under that Subdivision the taxable income of a complying superannuation fund consists of two components: a non-arm's length component and a low tax component. The non-arm's length component is taxed at 45% for the 2006-2007 income year and later income years, and the low tax component is taxed concessionally at 15%, as per subsection 26(1) of the Income Tax Rates Act 1986.

Subsection 295-545(2) of the ITAA 1997 states that:

The non-arm's length component for an income year is the entity's non-arm's length income of that year less any deductions to the extent that they are attributable to that income.

Subsection 295-545(3) of the ITAA 1997 states that:

The low tax component is any remaining part of the entity's taxable income for the income year.

Income of a complying superannuation fund is non-arm's length income of the fund if a relevant subsection of section 295-550 of the ITAA 1997 applies to such income. Relevantly, subsections 295-550(4) and (5) of that section state that:

(4) Income derived by the entity as a beneficiary of a trust, other than because of holding a fixed entitlement to the income, is non-arm's length of the entity.

(5) Other income derived by the entity as a beneficiary of a trust through holding a fixed entitlement to the income of the trust is non-arm's length income of the entity if:

(a) the entity acquired the entitlement under a scheme, or the income was derived under a scheme, the parties to which were not dealing with each other at arm's length; and

(b) the amount of the income is more than the amount that the entity might have been expected to derive if those parties had been dealing with each other at arm's length.

If the Fund as an Eligible Beneficiary of the Service Trust does not hold a fixed entitlement to the income of the Service Trust, any income to be derived by the Fund from the Service Trust will, by itself, be non-arm's length income of the Fund under subsection 295-550(4) of the ITAA 1997. It is therefore necessary to consider if the Fund holds a fixed entitlement to the income of the Service Trust.

Whether the Fund has a fixed entitlement

In your private-ruling application, you submitted that subsection 295-550(4) of the ITAA 1997 does not apply to income to be derived by the Fund from the Service Trust as an Eligible Beneficiary of the Service Trust because the Fund has a fixed entitlement to the corpus or net income of the Service Trust. Specifically:

(a) Whilst a "fixed entitlement" for these purposes is not defined it is submitted that the question of "fixed entitlement to the income" with respect to a year of income will be established when the beneficiary can establish with respect to that year an entitlement to the relevant trust's income which is fixed or capable of being defined by the application of pre-determined and objective criteria (a mathematical formula for example as is the case here) and is not otherwise capable of being made subject of defeasance (whether potential or actual) or interference by any third party direction of [sic] discretion.

(b) Under the Deed the Eligible Beneficiaries in relation to each Member are entitled as of right to participate in the Trust corpus and net income by reference to the Member's "Membership Proportion"… It is submitted that as regards the Membership Proportion applicable to each Member that proportion evidences a fixed entitlement because:

At any point in time it is a fixed percentage and is not capable of being made subject to defeasance or interference by way of third party direction of [sic] discretion. The Membership Proportion may change by virtue of the number of Members of the Trust changing. That does not mean however that the Members Membership Proportion is any less fixed but rather the methodology by which the Membership Proportion is determined involves a mathematical calculation…That process is not subject to any third party direction or discretion but is simply a matter of construction of the Trust Deed as a mathematical formulation and in that sense is fixed.

(c) It is accepted in the ordinary course that the entitlement of any one Eligible Beneficiary (as distinct from the Eligible Beneficiaries as a collective in relation to any one Member) to any Trust corpus or net income will not arise by virtue of a fixed entitlement. Ordinarily, once the Trustee has determined the amount of Trust net income or corpus in question in relation to a Member (by virtue of the fixed entitlement) the end entitlement of any one or more Eligible Beneficiaries to that fixed entitlement is a matter in the Trustee's discretion…

(d) A fixed entitlement to the Trust net income or corpus nevertheless arises to [the Fund] by virtue of the Deed Poll. Under the Deed Poll the Trustee acknowledges an obligation "to pay all distributions in respect of the Trust in relation to the Applicant to…" [the Fund]. The Deed Poll therefore has the effect of limiting the Eligible Beneficiaries with respect to [the Fund Member]'s membership under the Trust to [the Fund] alone. The entitlement of [the Fund] to the Share of the Trust net income and corpus is thereby fixed.

A 'fixed trust' is defined in similar terms in subsection 995-1(1) of the ITAA 1997 and section 272-65 of Schedule 2F to the Income Tax Assessment Act 1936 (the ITAA 1936). The latter definition provides that:

A trust is a fixed trust if persons have fixed entitlements to all of the income and capital of the trust.

The definition of 'fixed entitlement' in subsection 995-1(1) of the ITAA 1997 provides that:

an entity has a fixed entitlement to a share of the income or capital of a company, partnership or trust if the entity has a fixed entitlement to that share within the meaning of Division 272 in Schedule 2F to the Income Tax Assessment Act 1936.'

As to what constitutes a 'fixed entitlement', subsection 272-5(1) of Schedule 2F to the ITAA 1936 states that:

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.

In addition, subsection 272-5(2) of Schedule 2F to the ITAA 1936 states that:

If:

(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.

The word 'interest' is a word that is capable of many meanings. In the absence of a definition one must infer its meaning from the context in which it is found (see Gartside and Another v Inland Revenue Commissioners (Gartside)¹, Commissioner of Stamp Duties (Queensland) v Livingston (1964)² and CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic)³).

There may be circumstances in which the word 'interest' could be interpreted broadly to include any right or advantage that a person might be able to claim with respect to the income or capital of the trust and/ or in respect of the trustee, whether present or future, ascertained or potential. In the context of Schedule 2F to the ITAA 1936, however, it is clear that for an interest to be recognised as a fixed interest it must be a right with respect to a share of the income or of the capital of the trust that is susceptible to measurement. To adopt the words of Lord Wilberforce in Gartside, the right must have 'the necessary quality of definable extent'.

The term 'vested and indefeasible' is not defined in the taxation legislation. However the Explanatory Memorandum (EM) to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 does discuss its ordinary meaning at some length, at paragraphs 13.4 to 13.9. In essence:

· a person has a vested interest in something if the person has a present right relating to the thing (paragraph 13.4);

· in traditional analysis, a person can be said to be either 'vested in possession' or 'vested in interest', and in the definition of 'fixed entitlement' the word 'vested' includes both 'vested in possession' and 'vested in interest' (paragraph 13.5);

· a vested interest is indefeasible where, in effect, it is not able to be lost, and a vested interest is defeasible where it is subject to a condition subsequent that may lead to the entitlement being divested, for example, where a beneficiary's vested interest is able to be taken away by the exercise of a power by the trustee or any other person, in which case the interest will not be a fixed entitlement (paragraph 13.7).

In Colonial First State Investments Ltd v Federal Commissioner of Taxation⁴ Justice Stone stated, at paragraph 97 of the judgement, that:

The Act does not define 'indefeasible' and therefore, subject to the qualification in s 272-5(2), it bears its ordinary meaning when applied to an interest, that is that the interest cannot be terminated, invalidated or annulled. Certainly this is the meaning to which the qualification in s 272-5(2) is directed.

The meaning of the term 'vested and indefeasible' (in the context of Schedule 2F to the ITAA 1936) also appears in subsection 95A(2) of the ITAA 1936 and has been considered in that context by the courts in Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation⁵, Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation, Dwight v Commissioner of Taxation⁶ and Harmer v Federal Commissioner of Taxation.

Also relevant are MSP Nominees Pty Ltd v Commissioner of Stamps (SA), Queensland Trustees Ltd v Commissioner of Stamp Duties⁷ and Glenn v Federal Commissioner of Land Tax (1915).

It is an essential element of subsection 272-5(1) of Schedule 2F to the ITAA 1936 that in order to have a fixed entitlement to a share of income or capital there must be a vested or indefeasible interest "under a trust instrument". In all cases, the determining factor in deciding if fixed entitlements exist will be the terms of the trust instrument under which the trust is constituted. Neither the form of the trust nor the labels that are attached to it can determine this question.

The first step in determining whether a beneficiary has a vested and indefeasible interest in a share of the income or capital of a trust is to ascertain the terms of the trust upon which the relevant trust property is held. As the High Court stated in CPT Custodians Pty Ltd v Commissioner of State Revenue (Vic) and Commissioner of State Revenue (Vic) v Karingal 2 Holdings Pty Ltd⁸ at [15], in taking this step:

'…a priori assumptions as to the nature of unit trusts under the general law and principles of equity [will] not assist and would be apt to mislead. All depends, as Tamberlin and Hely JJ put it in Kent v SS "Maria Luisa" (No 2), upon the terms of the particular trust. The term "unit trust" is the subject of much exegesis by commentators. However, "unit trust", like "discretionary trust", in the absence of an applicable statutory definition, does not have a constant, fixed normative meaning which dictate the application to particular facts of the [relevant statutory definition]…'

There will be some circumstances in which a trust instrument must be read subject to the operation of a particular legal rule, whether by common law, statute or statutes. For example, if the constitution of a registered managed investment scheme is inconsistent with the provisions of Chapter 5C of the Corporations Act 2001, the latter can have the effect of altering or modifying the former. It is possible for a constitution to be altered or modified by operation of law irrespective of whether the trust instrument itself expressly recognises the relevant common law rule or statute, and the entitlements of a beneficiary under the trust instrument are those as so altered or modified by operation of law.

The important question is whether the vested and indefeasible interests represent 100% of the income and 100% of the capital of the trust. The fact that a power held by the trustee or manager has not yet been exercised is not relevant when determining if the power results in an interest being defeasible. The exercise of the power determines if an interest has in law been defeased, not if it is defeasible. The real question is whether the power, if exercised, would result in a defeasance of some or all of the unitholder's rights to the income and/or capital of the trust.

For the purposes of subsection 272-5(1) of Schedule 2F to the ITAA 1936, the trust instrument in this case consists of the original deed (by which the Service Trust was constituted) as amended by three supplemental deeds (collectively, the Deed). Pursuant to the Deed, which is concerned with declaration of trust:

(a) the Trustee will hold and stand possessed of the Corpus and Net Income of the Service Trust upon trust for the Eligible Beneficiaries of the Members and for Distribution amongst the Eligible Beneficiaries in relation to each Member in the Membership Proportion of that Member subject to the powers and provisions expressed in the Deed; and

(b) subject to the Deed, the beneficial interest in the Trust Fund will be vested in the Original Members and the other Persons hereafter becoming registered as the Members.

As noted before:

(a) "Eligible Beneficiaries", in relation to each Member, means "that Member and the Associates thereof or some one or more of them selected by the Trustee to receive a Distribution pursuant to the trusts and powers expressed or implied in this Deed" (italics added);

(b) "Person" is defined in the Deed as "includes a partnership and a Company and a trustee of any trust estate or settlement"; and

(c) Associate" in relation to a Member includes, relevantly:

(i) any Company in which a Member thereof is an officer or shareholder;

(ii) any Person who is an officer or shareholder of such Company; and

(iii) any Person who is an associate of the Member within the meaning of sub-section 82KH(1) of the ITAA 1936.

The provision in a clause of the Deed suggests that the beneficial interest in the Trust Fund is vested in the Members collectively (and not in the Eligible Beneficiaries) and that distributions of the Corpus and Net Income of the Service Trust to Eligible Beneficiaries are in accordance with the Membership Proportion of each of the Members, subject however to the powers of the Trustee and the provisions in the Deed. It is difficult to envisage, from the clause alone, that Eligible Beneficiaries, of which the Fund is one, have a vested interest themselves in the Trust Fund (as the beneficial interest in the Trust Fund is stated in the Deed to be vested in the Members), much less a fixed entitlement.

We have also noted that the Deed contains clauses the effect of which is that an Eligible Beneficiary's interest in a share of the capital or income of the Service Trust may be defeased when the Trustee exercises a power under the Deed. In the subsequent paragraphs we shall look at the effect of the clauses involved.

The definition of 'Eligible Beneficiaries' in a sub-clause of the Deed refers to a Member or an Associate of the Member who is '…selected by the Trustee to receive a Distribution…'. This gives the Trustee the power to determine which Eligible Beneficiary is to receive a distribution. In other words, under the Deed a person is not automatically entitled to distributions from the Service Trust by virtue of being an Eligible Beneficiary (as a Member of the Service Trust or as an Associate of the Member).

The same wording is used in another sub-clause of the Deed, which, in the context of the meaning of the word 'distribute', refers to 'Eligible Beneficiaries selected by the Trustee' (italics added) and which empowers the Trustee to make:

(a) a declaration that the Trustee holds and stands possessed of the net income or corpus of the Service Trust for and on behalf of Eligible Beneficiaries selected by the Trustee; and

(b) an irrevocable written resolution vesting an indefeasible and absolute interest in the net income or corpus of the Service Trust specified in the resolution in favour of the Eligible Beneficiaries selected by the Trustee.

In other words, under the Deed an Eligible Beneficiary is not entitled to any distribution from the Service Trust unless the Eligible Beneficiary is selected by the Trustee to receive a distribution from the Service Trust.

We have also noted that on termination of a Member's membership with the Service Trust, the Trustee will, pursuant to a specified clause of the Deed and among other things, make an interim distribution to the Eligible Beneficiaries of the Member concerned in the amounts and proportions of the net income or part thereof amongst those Eligible Beneficiaries at its absolute and uncontrolled discretion.

When it comes to annual and interim distributions of the net income of the Service Trust, again, the Deed gives the Trustee an absolute and uncontrolled discretion in applying the amounts and proportions of the net income among the Eligible Beneficiaries of each Member in the membership proportion of that Member.

In the Deed Poll executed by the Fund Member in their capacity as Applicant for membership of the Service Trust and in his/her capacity as the sole director of the Fund Trustee, it is noted that:

(a) the Applicant has requested that upon him/her becoming a Member of the Service Trust all distributions of the corpus or income of the Service Trust be paid to the Fund on the basis that the Fund will be an Associate of the Applicant; and

(b) the Trustee has agreed to the request of the Applicant referred to above.

Based on this Deed Poll it may be argued that as the Fund is to receive all distributions from the Service Trust, the Trustee cannot select any other Eligible Beneficiaries of the Fund Member than the Fund for the purpose of making a distribution, and there is no need for the Trustee to determine the amounts and proportions of the distribution amongst the Eligible Beneficiaries in its absolute and uncontrolled discretion (as there are no other nominated Eligible Beneficiaries apart from the Fund).

Even if the Trustee has noted the Fund Member's request for all distributions from the Service Trust to be made to the Fund, such an argument may not be sustainable due to the following reasons:

(a) the Fund Member's request does not necessarily replace or abrogate the Trustee's power to exercise its absolute and uncontrolled discretion under the Deed;

(b) under the Deed Poll, the Fund Member (in their dual roles as the Applicant and the sole director of the Fund Trustee) expressly releases the Trustee from all liabilities in respect of the Fund not being an Associate within the meaning of the Deed;

(c) by definition "Eligible Beneficiaries" in relation to each Member means "that Member and the Associates thereof or someone or more of them selected by the Trustee to receive a distribution pursuant to the trusts and powers expressed or implied in the Deed", hence possible and proper for the Trustee to select, if it thinks fit, both the Fund Member (as Member of the Service Trust) and the Fund (as Associate) as recipients of a distribution from the Service Trust;

(d) that the Fund is, as per your advice, an Associate of the Fund Member under the Deed based on the definition given to the word "associate" by paragraph (a)(iv) of subsection 82KH(1) of the ITAA 1936 is questionable because that definition is provided in the context of losses and outgoings incurred under tax avoidance schemes whereas the apparent purpose of the Fund Member nominating the Fund as an Associate is to let the Fund receive distributions of income from the Service Trust (and pay tax thereon at a concessional rate of tax).

Besides, a specified clause in the Deed permits the Trustee to vary the Deed if such variation is approved by the Members of the Service Trust by special resolution. Any such variation may lead to the interests of Members being defeased.

It is, therefore, considered reasonable to conclude, pursuant to subsection 272-5(1) of Schedule 2F to the ITAA 1936, that all Eligible Beneficiaries of the Service Trust (the Fund included) do not have fixed entitlements to the Corpus and/or the Net Income of the Service Trust.

Commissioner's discretion

Where beneficiaries do not have a fixed entitlement, the Commissioner may, under subsection 272-5(3) of Schedule 2F to the ITAA 1936, exercise his discretion to treat such beneficiaries as having a fixed entitlement if, based upon the factors prescribed in paragraph 272-5(3)(b) it is reasonable to do so. The factors under that paragraph are:

(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 concept of a 'fixed entitlement' was originally introduced in the context of the trust loss measures and should primarily be interpreted in that context. The trust loss measures are an important integrity measure, removing a structural flaw in the tax system. The concept of a 'fixed entitlement' is fundamental to the structure and effectiveness of the trust loss measures.

The EM to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 states, at paragraph 13.13, in respect of the Commissioner's power in subsection 272-5(3) of the ITAA 1936, that:

This provision is intended to provide for special circumstances where there is a low likelihood of a beneficiary's vested interest being taken away or defeated and, having regard to the scheme of the trust loss provisions to prevent the transfer of the tax benefit of losses and other deductions incurred by trusts, it would be unreasonable to treat the beneficiary's interest as not constituting a fixed entitlement

This passage seems, however, to indicate that when looking at the facts of a case in the context of the criteria listed in subsection 272-5(3) regard should always be had to whether the absence of a fixed entitlement in these circumstances could result in the transfer of the tax benefit of losses.

The interpretation of the meaning of 'vested and indefeasible' for the purposes of section 272-5 of Schedule 2F to the ITAA 1936 was raised at the March 2006 meeting of the National Tax Liaison Group, which is a consultative forum for the ATO and tax professionals to consider topics of strategic importance and/or concerns with a view to achieving a fair, effective and efficient administration and delivery of Australia's tax and superannuation systems. The issue was referred to its newly formed Trust Consultation Sub-group for discussion. At the Sub-group's meeting on 28 November 2006, the ATO advised that:

In applying the discretion, the ATO would have regard to what the Office understands was the policy that underlay the provisions at the time they were enacted. The Commissioner would also have to apply the statutory tests having regard to the terms of the particular trust deeds and all the surrounding circumstances.

In the absence of any precedential guidelines, taxpayers seeking access to the Commissioner's discretion will be dealt with according to the relevant facts on a case by case basis.

In the case of trusts which are managed investment schemes, it is also appropriate that consideration is given to any potential impacts that the Corporations Act 2001 (as noted above), the regulatory powers of the Australian Securities and Investments Commission, and the actions of the Australian Securities Exchange may have on the administration of trust and the entitlements of beneficiaries.

As we have earlier concluded that Eligible Beneficiaries of the Service Trust do not have a fixed interest in a share of income of the Service Trust pursuant to subsection 272-5(1) of Schedule 2F to the ITAA 1936, it is necessary to consider whether the Commissioner should exercise his discretion under subsection 272-5(3)to treat the Eligible Beneficiaries as having a fixed interest in the income of the Service Trust.

Pursuant to a specified clause of the Deed, beneficial interest in the Trust Fund is vested in the Original Members and the other Persons hereafter becoming registered as Members subject to the Deed. Pursuant to that same clause, the Trustee holds and stands possessed of the corpus and the net income of the Service Trust upon trust for the Eligible Beneficiaries in relation to each Member in the Membership Proportion of that Member, subject to the powers and provisions expressed in the Deed concerning the same.

As noted before, when defining the meaning of the word "distribute", the relevant clause of the Deed includes a reference to "a declaration made by the Trustee that it holds and stands possessed of the net income or corpus (as the case may be) specified in the Resolution for and on behalf of those Eligible Beneficiaries selected by the Trustee". Apart from defining "Eligible Beneficiaries" in relation to each Member as meaning "that Member and the Associates thereof", the relevant clause of the Deed also makes reference to "someone or more of them selected by the Trustee to receive a Distribution". In other words, there is no absolute certainty that a particular Eligible Beneficiary of the Service Trust will receive a distribution from the Service Trust.

It is also noted that the entitlement of Eligible Beneficiaries may be affected by any amendment to the Deed concerning entitlement and/or the Trustee's powers and discretion, which may be proposed as a special resolution in a duly convened general meeting of Members and be passed by a specified percentage of the votes cast by the Members of the Service Trust present.

In view of these circumstances, we do not consider it reasonable for the Commissioner to treat the Eligible Beneficiaries as having a fixed entitlement.

Secondly, the Service Trust is not listed and is not a registered managed investment scheme for the purposes of the Corporations Act 2001. Prima facie it is a closely held trust. There is no external supervision of the operations of the Service Trust, nor is there any fiduciary controls over and above those which apply generally to trustees in accordance with the relevant state trustee legislation. This increases the chance of a defeasance happening resulting from the decisions of the Trustee in relation to the clauses mentioned earlier in these 'Reasons for decision'. The likelihood of such happening will depend on the commercial imperatives of the Trustee and the need for flexibility in the Service Trust's operation.

In the circumstances, we do not consider it reasonable for the Commissioner to treat the Eligible Beneficiaries of the Service Trust as having a fixed entitlement.

Thirdly, the Deed permits an Associate in relation to a Member to be the Member Principal (if the Member is a company), the Specified Relatives of, and/or any other persons associated with, the Member or the Member Principal. An Associate, by definition, is an Eligible Beneficiary. In other words, such provisions in the Deed were designed to allow a Member of the Service Trust, prima facie a closely held trust, to decide whether the Member alone is to receive a distribution from the Service Trust and, if not, who (either in conjunction with the Member or in the Member's stead) is/are to receive a distribution from the Service Trust.

As a Member may, at any time, notify the Trustee of a change in the Associate(s) previously nominated by the Member, there is no certainty that an existing Eligible Beneficiary of the Member will receive a distribution at the end of an income year. This is another unfavourable factor for the Commissioner to treat the Eligible Beneficiaries of the Service Trust as having a fixed entitlement.

To conclude, we are of the view that the Commissioner should not exercise his discretion under subsection 272-5(3) of Schedule 2F to the ITAA 1936 to treat an Eligible Beneficiary of the Service Trust as having a fixed entitlement in the Service Trust.

What if the Fund does have a fixed entitlement

In the alternative, should it be established that the Fund does have a 'fixed entitlement' to the corpus and/or net income of the Service Trust, the question to be asked is whether income to be derived by the Fund through holding such a 'fixed entitlement' is non-arm's length income of the Fund under subsection 295-550(5) of the ITAA 1997.

Taxation Ruling TR 2006/7 explains what amounts are considered to be 'special income' under section 273 of the ITAA 1936. Though section 273 was repealed in 2007 and re-written as section 295-550 of the ITAA 1997, and the term "special income" has since been substituted by "non-arm's length income", TR 2006/7 continues to have effect because the EM to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 states, in paragraph 3.1, that:

…The rewritten provisions in Division 295 of the ITAA 1997 do not change the law as it currently operates under Part IX of the ITAA 1936.

In the following paragraphs, TR 2006/7 also explains when income derived by a complying superannuation fund as a beneficiary of a trust by virtue of holding a fixed entitlement to the income of the trust is special income of the fund:

102. A trust distribution to a complying superannuation fund, complying ADF or PST will fall within subsection 273(7) rather than subsection 273(6) if the entity's entitlement to the distribution does not depend upon the exercise of the trustee's or any other person's discretion.

103. A trust distribution arising from a fixed entitlement will only be special income if three conditions are met:

· the entity must have acquired the fixed entitlement under an arrangement or the income must have been derived under an arrangement;

· some or all of the parties to the arrangement must not have been dealing with each other at arm's length; and (italics added)

· the amount of the distribution must be greater than the amount of income that might have been expected if the parties had been dealing with each other at arm's length.

112. Some or all of the parties to the arrangement must not have been dealing with each other at arm's length. Subsection 273(7) does not require that all persons who have entitlements to the trust were not dealing at arm's length. Nor does it require that all members of the superannuation entity benefit from the arrangement.

113. When considering whether some or all of the parties to the arrangement were dealing with each other at arm's length, the Commissioner will adopt an approach similar to that set out in paragraphs 76 to 78 of this Ruling. The only differences are that subsection 273(7) applies to an arrangement rather than a transaction and only requires that some of the parties to that arrangement are not dealing with each other at arm's length.

The word "scheme" in subsection 295-550(5) of the ITAA 1997 is defined in subsection 995-1(1) as meaning:

(a) any arrangement; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

"Arrangement" means, according to subsection 995-1(1) of the ITAA 1997:

any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings.

A scheme may comprise the whole of an agreement, arrangement, etc or one or more steps within the arrangement. The following statement was made by the High Court in Federal Commissioner of Taxation v Hart⁹ in the context of Part IVA of the ITAA 1936 which defines 'scheme' in comparable terms:

Th[e] definition is very broad. It encompasses not only a series of steps which together can be said to constitute a "scheme'' or a "plan'' but also (by its reference to "action'' in the singular) the taking of but one step.

As a 'scheme' or 'arrangement' embraces agreement, promise, undertaking and steps within an arrangement, for the purposes of subsection 295-550(5) of the ITAA 1997 we now consider what the 'scheme' or 'arrangement' that the Fund Member put in place is and how it was put in place.

Constituted by deed in the early 1990s, the Service Trust provides administration services and working areas for practitioners in the specified profession who are either Members of the Service Trust, or Associates (being Practitioners who are not Members of the Service Trust but practise in conjunction with the Service Trust). The Service Trust charges:

(a) in the case of a Member - the prescribed Service Fees plus a specified percentage of the average amount of Professional Fees collected per Member under a Service Agreement; and

(b) in the case of an Associate - a certain 'standard fee' under an Associate Agreement.

Service Fees collected by the Service Trust have been the main source of the Service Trust's income. After paying out all costs, expenses and other outgoings, the Trustee:

(a) holds and stands possessed of any net income of an Accounting Period for the Eligible Beneficiaries in relation to each Member and in the Membership Proportion of that Member in the amounts and proportions amongst those Eligible Beneficiaries as the Trustee in its absolute and uncontrolled discretion thinks fit; and

(b) discharges the trusts of that net income of the Accounting Period of that Net Income or any balance thereof by paying or transferring the same to the Eligible Beneficiaries beneficially entitled thereto or otherwise crediting the amount so Distributed in the Books of the Service Trust.

For a number of years the Beneficiaries Accounts of the Members received distributions from the Service Trust as their share of profit.

At any time and from time to time before the Vesting Day, the Trustee may also distribute the corpus of the Trust Fund that comprises the Premium Account Balance of each Member, or the corpus other than the Premium Account, for the time being in excess of the immediate requirements of the Service Trust to the Eligible Beneficiaries of that Member by payment in cash or other Property.

As noted before, 'Eligible Beneficiaries' in relation to each Member means "that Member and the Associate thereof or some one or more of them selected by the Trustee". You have advised that the Fund is an Associate of the Fund Member (in their capacity as a Member of the Service Trust) by reference to the relevant clause of the Deed. When the Fund Member becomes a Member of the Service Trust, the Fund as an Associate of the Fund Member becomes an Eligible Beneficiary of the Service Trust.

Prior to becoming a Member of the Service Trust, the Fund Member was an Associate of the Service Trust, i.e. a practitioner who was a party to an Associate Agreement with the Service Trust.

Within this background, the following events, or steps, took place:

(a) The Fund Member applied in the fourth quarter of the 2010-11 income year to the Trustee of the Service Trust to become a Member of the Service Trust.

(b) As part of the application process, the Fund Member executed in the fourth quarter of the 2010-11 income year the Service Agreement, which had a commencement date in the first quarter of the 2011-12 income year and under which, among other things:

(i) the Trustee agrees to provide the Fund Member with General Services, Staff Services and Office Services and, by way of licence, any working area forming part of the Premises to be used exclusively by the Fund Member for their practice; and

(ii) the Fund Member agrees to pay the prescribed Service Fees plus the specified percentage of the average amount of Professional Fees collected per Member to the Trustee.

(c) As part of the application process, the Fund Member is taken to have executed a Bond Agreement, under which the Fund Member agrees to pay the specified bond amount and non-refundable premium amount to the Trustee of the Service Trust.

(d) The Fund Member executed in the fourth quarter of the 2010-11 income year a Deed Poll both in their individual capacity as the Applicant for Membership of the Service Trust and in their capacity as the sole director of the Fund Trustee. According to the Deed Poll, which was addressed to the Trustee:

(i) the Applicant requested the Trustee that, upon the Applicant becoming a Member of the Service Trust, the Fund as the Nominee is to be paid, by the Trustee, all distributions of corpus or income of the Service Trust on the basis that the Nominee will be an Associate of the Applicant hence also an Eligible Beneficiary of the Applicant under the Deed; and

(ii) the Trustee agrees to the Applicant's request.

(e) The Fund, instead of the Fund Member, paid the Service Trust the specified Bond amount and the Premium amount. The Fund Trustee viewed the amounts paid as the "consideration" given by the Fund to the Service Trust for the Fund to "acquire" a specified percentage of "fixed interest" in the Service Trust. The Fund, instead of the Fund Member, also paid to the Trustee an additional amount by way of a loan as a contribution to the Service Trust's working capital, the reason given being that other Members of the Service Trust were doing the same at one time or another.

While the Deed permits a Member to have one or more Associates hence one or more Eligible Beneficiaries, through the Deed Poll the Fund Member nominated the Fund as the sole Eligible Beneficiary in relation to his/her Membership of the Service Trust.

In our view, all these events, or steps, were for the ultimate objective of putting in place a scheme or an arrangement whereby the Fund, rather than the Fund Member himself/herself or any other potential Associates of his/hers, will, by holding a purportedly "fixed entitlement" to the corpus or net income of the Service Trust, derive income from the Service Trust in future income years.

On the question of whether parties are dealing with each other at arm's length or otherwise, it was stated in paragraphs 76 to 78 of TR 2006/7 that:

76. The Commissioner considers that parties are dealing with each other at arm's length in relation to a transaction if the independent minds and wills of the parties are applied to the transaction and their dealing is a matter of real bargaining. If this is not the case, the Commissioner will consider that the parties are not dealing with each at arm's length in relation to the transaction.

77. If the relationship of the parties is such that one party has the ability to influence or control the other, this will suggest that the parties may not be dealing at arm's length, but it will not be determinative.

78. Parties that are not at arm's length can deal with each other at arm's length in relation to a transaction and parties that are at arm's length can deal with each other in a way that is not at arm's length. An amount of income can only be special income under subsection 273(4) if, in relation to the particular transaction, the parties are not dealing with each other at arm's length.

The term 'arm's length' is not defined. However, subsection 995-1(1) of the ITAA 1997 states that:

In determining whether parties deal at arm's length, consider any connection between them and any other relevant circumstance.

The view expressed in paragraph 76 of TR 2006/7 is based on the Federal Court's decisions in Re Hains (deceased), Barnsdall v Commissioner of Taxation; Trustee for Estate of AW Furse No. 5 Will Trust v Commissioner of Taxation; and Granby Pty Ltd v Commissioner of Taxation and the examples in the EM to the Superannuation Legislation Amendment Bill (No. 2) 1999, which, as enacted, inserted subsections 273(6) to (8) of the ITAA 1936.

These cases were also relied upon in Allen (As Trustees for Allens Asphalt Staff Superannuation Fund v Commissioner of Taxation (Allen), in which the Federal Court held that a distribution from a fixed trust to a superannuation fund in consequence of the superannuation fund holding a fixed entitlement to 100% of the income of the fixed trust constituted special income in the hands of the superannuation fund for the purposes of subsection 273(7) of the ITAA 1936. In that case, Justice Collier said, in paragraph 90, that:

… if conduct of parties is not consistent with conduct of independent third parties, because one party is exerting personal influence or control over the other or others, dealings between them cannot be termed "arm's length"

The Federal Court's decision in Allen that the distribution from the fixed trust to the superannuation fund was special income of the fund was affirmed by the Full Federal Court.

At all material times the Fund Member is:

(a) the sole director of the Fund Trustee; and

(b) a Member of the Service Trust.

As a Member of the Service Trust, the Fund Member nominated the Fund as their Associate and requested the Trustee to pay all distributions (payable in respect of their Membership of the Service Trust) to the Fund.

In view of the close relationship, the Fund Member in his/her capacity as a Member of the Service Trust and in his/her capacity as the sole director of the Fund Trustee are non-arm's length parties in relation to the Fund's interest in the corpus and/or net income of the Service Trust. Although the nature of the relationship between parties is relevant in determining whether dealings between them are at arm's length, parties that are not at arm's length can still deal with each other at arm's length in relation to a particular dealing.

As it is possible for parties that are not at arm's length to deal with each other at arm's length in relation to any particular dealing, the Commissioner has to consider if the following were consistent with an arm's length dealing:

(a) the nomination of the Fund by the Fund Member as the sole Eligible Beneficiary of the Service Trust in relation to his/her Membership of the Service Trust; and

(b) the payment of the Bond and the Premium, and the provision of a loan, to the Trust by the Fund instead of the Fund Member.

You submitted, in your private-ruling application, that:

The dealings as between the Fund and the Trustee have all been at arm's length and conducted on an arm's length basis.

The Service Agreement, along with all other Service Agreements struck between the Service Trust and all other Members, has been struck as between arm's length parties and on arm's length basis.

The ATO has prescribed guidelines in Taxation Ruling TR 2006/2 and the April 2006 Booklet for the conduct of trusts such as the Service Trust which requires that the terms of service agreements as between professional practices and trust service provider must be struck on commercial terms. The Fund contends that the Service Trust activities have been, and will continue to be, conducted in accordance with the ATO guidelines.

In practical terms all Members (in the Fund Member's case, the Fund) have an obligation to indemnify the Service Trust.

However, under the Deed, a Practitioner must:

(a) to become a Member of the Service Trust:

(i) execute and deliver to the Trustee for execution a written Service Agreement and a Bond Agreement; and

(ii) pay the bond and the premium to the Trustee; and

(b) after becoming a Member of the Service Trust:

(i) provide an after-hours call service for their practice and agree to a roster for providing such service; and

(ii) seek the Trustee's permission for commencing any extended leave period.

Any dealings pursuant to the Deed are, therefore, necessarily between the Trustee and the Fund Member as a Member of the Service Trust, not between the Trustee and the Fund Trustee on behalf of the Fund.

Under the Service Agreement, again any dealings are necessarily between the Trustee and the Fund Member (the Practitioner), not between the Trustee and the Fund Trustee. This is because pursuant to the Service Agreement:

(a) the Trustee:

(i) provides the Practitioner with management and clerical services and certain limited equipment and premises for use by the Practitioner; and

(ii) charges the Practitioner Service Fees, which are marked up by specified percentages; and

(b) the Practitioner agrees to pay the Trustee the prescribed Services Fees charged as well as a specified percentage of the average amount of Professional Fees collected per Member.

No analysis has yet been made on whether the Trustee and the Fund Member (in their capacity as a Member of the Service Trust) were dealing with each other at arm's length. Even if they were dealing with each other at arm's length, such arm's length dealing between them do not automatically lead to a conclusion that the Fund Member, the Fund Trustee on behalf of the Fund and the Trustee were dealing with each other at arm's length. Indeed, there is no direct relationship between the Trustee and the Fund Trustee on behalf of the Fund, as far as Membership of the Service Trust is concerned (with which the Trustee primarily deals), since the Fund's interest is that of an Eligible Beneficiary only.

It is, therefore, necessary to consider whether the dealings between the Fund Member (in his/her capacity as a Member of the Service Trust) and the Fund Trustee were at arm's length.

Income derived by the Service Trust from Services Fees charged to Members of the Service Trust accounted for almost over 90% of the Service Trust's total income for the income year ended 30 June 2010 according to the Service Trust's Profit and Loss Account for that income year. After meeting all costs and outgoings, this income is distributed (usually annually) to Eligible Beneficiaries who, as is noted before, may be the Members themselves and/or their Associates.

Since it is the personal exertions of a Member of the Service Trust, not those of the Member's Associate, that contribute towards the Service Trust's income, the fact that a Member of the Service Trust nominates an Associate to receive distributions from the Service Trust as an Eligible Beneficiary is intrinsically a gratuitous act on the part of the Member in favour of, and for the benefit of, the Associate and is clearly not an arm's length dealing between the Member and the Associate.

From the Trustee's standpoint, that an Associate should receive a distribution from the Service Trust as an Eligible Beneficiary is simply because the Member concerned wants it to be so for some reason, not because the Associate has paid any consideration to, or has any direct interest in, the Service Trust. Indeed, whether it is necessary or proper for the Trustee to be aware of, or to look upon, the payment made, and the loan provided, by the Fund to the Service Trust as a consideration given by the Fund to secure an entitlement to a share of the Service Trust's income is questionable, since an Eligible Beneficiary does not have to pay any consideration under the Deed for receiving distributions from the Service Trust.

By nominating the Fund as the sole Eligible Beneficiary of the Service Trust, the Fund Member (in his/her capacity as a Member of the Service Trust) and the Fund Trustee were not dealing with each other at arm's length, regardless of whether the Fund's interest in the Service Trust is a fixed entitlement.

Neither the law nor the Deed itself prohibits a superannuation fund, a trust, a company, a partnership or an individual related to a Member of the Service Trust from being nominated by that Member as an Associate of that Member, and through that, as an Eligible Beneficiary of the Service Trust for the purpose of receiving distributions from the Service Trust. However, subsections 295-550(4) and (5) of the ITAA 1997 prima facie treat any distributions so received by a complying superannuation fund from the Service Trust as non-arm's length income of the fund unless the contrary is proved. This is to stop tax concessions given to complying superannuation funds from being abused.

Instead of the Fund Member themself paying the Service Trust for the bond and the premium and providing the Service Trust with the loan, the Fund actually made the payment and provided the loan for the Fund Member. In your private-ruling application you have submitted that:

On the facts [the Fund Member] has created, by agreement with the Trustee, a fixed and indefeasible interest in the Trust in favour of [the Fund]. That fixed entitlement is evidenced by:

· The consideration provided by [the Fund] by way of payment of Bond and the Premium (total of [a specified amount] invested, or , to be invested); and

· The rights bestowed upon [the Fund] under the Deed by virtue of [the Fund Member]'s request to the Trustee…and the right vested in [the Fund] to "all distributions in respect of the Trust"…The entitlement vested in [the Fund] has been granted by [the Fund Member] and the trustee [sic] under seal and therefore those rights are entrenched as proprietary rights by virtue of the rights in equity to seek enforcement. In any event, [the Fund] has provided consideration in respect of the acquisition of its interest in the Trust and hence the rights of [the Fund] can be enforced in contract.

With respect, your submissions missed the point that any interest in the Service Trust, whether as a fixed entitlement or otherwise, is primarily that of a Member, created as and when the Member (and not an Associate of the Member) complies with the admission requirements under the relevant clause of the Deed and, following that, is admitted to Membership of the Service Trust. It is the Member, not any Associate nominated by the Member, who is, pursuant to the Deed and contractually bound by the Service Agreement, to carry on a practice in conjunction with the Service Trust, through which practice income is generated for the Service Trust.

Unlike a unit trust where investors become unit holders by acquiring units in the unit trust, the Service Trust was established essentially to facilitate (and perhaps attract more) interested practitioners in the same profession carrying on their practices in conjunction with the Service Trust on a cost and profit-sharing basis, not the Associates (if any) that may be brought into the scene by interested practitioners for the mere purpose of enabling such Associates to receive distributions from the Service Trust.

The Fund is not a practitioner and cannot, therefore, apply for Membership of the Service Trust. Consequently, no rights and obligations pertaining to such Membership attach to the Fund. It is, therefore, difficult to conceive how the Fund, by paying the bond and the premium, as well as providing the loan, for its own account, can enforce (as against the Trustee) any proprietary rights it purports to have acquired or secured through the payment and the loan.

As mentioned before, the Trustee distributes the corpus and/or net income of the Service Trust to Eligible Beneficiaries not because a particular Eligible Beneficiary has secured an entitlement to such corpus or net income by making a certain payment to the Service Trust, but simply because the Member concerned has nominated the particular Eligible Beneficiary as such (for the purpose of receiving distributions from the Service Trust). It is therefore not necessary, or proper at all, for the Fund to pay for the bond and the premium and to provide the loan, which the Fund Member themselves (in their capacity as an Applicant for Membership of the Service Trust) should have paid and provided:

(a) in fulfilment of their obligations under their application for Membership of the Service Trust; and

(b) for their ultimate benefit as a Member of the Service Trust.

The fact that:

(a) the Fund nevertheless paid for the bond and the premium, and provided the loan, in the Fund Member's stead; and

(b) in the event of the Fund Member's Membership with the Service Trust being terminated, the amounts of the bond, the premium and the loan will be returned to the Fund Member (in their capacity as a Member of the Service Trust) pursuant to the relevant clause of the Deed;

shows that the Fund Trustee and the Fund Member were not dealing with each other at arm's length.

You submitted that the payment and the loan were the consideration given by the Fund in respect of the acquisition of its interest in the Service Trust. As an Eligible Beneficiary of the Service Trust does not have to give the Trustee consideration in order to receive distributions from the Service Trust, 'consideration' must then be understood in the context of the Fund Trustee paying the Fund Member (in their capacity as a Member of the Service Trust) consideration in return for their giving up their entitlement to distributions from the Service Trust in favour of the Fund. But if this was the case, the consideration so given is nevertheless a non-arm's length dealing between the Fund Trustee and the Fund Member because:

(a) on an arm's length basis, as is required under subsection 295-550(5) of the ITAA 1997, the Fund must give the Fund Member adequate consideration in relation to the financial return it expects to derive from the arrangement, not just any consideration as may normally be acceptable under the law of contract; and

(b) the Fund Trustee has not provided any basis or calculation to quantify the amount of consideration that may objectively be considered as adequate having regard to the prospective income which the Fund Member (as a Member of the Service Trust) may generate for the Service Trust through his/her practice.

In the absence of such a basis or calculation, we have not been persuaded that a one-off payment of a specified amount by the Fund should entitle the Fund to receive annual distributions from the Service Trust for an indefinite period of time. In other words, it has not been demonstrated that the cost to the Fund is not disproportionate to the benefit that the Fund may obtain.

In Syngenta Crop Protection Pty Ltd v. Federal Commissioner of Taxation Justice Gyles of the Federal Court, when discussing arm's length consideration in the context of the transfer pricing provisions, held that the test for determining excessive income was objective, stating:

The question as to whether the consideration is that which might reasonably be expected to have been received or receivable as consideration in either a supply or acquisition if the property had been supplied or acquired under an agreement between independent parties dealing at arm's length is an objective question. It does not depend upon anybody's opinion, save that of the court or body making that decision. It is a matter for evidence.

In view of the above, we have to conclude that:

(a) the Fund Member's nomination of the Fund as the sole Eligible Beneficiary of the Service Trust; and

(b) the Fund's payment of the bond and the premium, and the provision of the loan, to the Service Trust in the Fund Member's stead;

were not consistent with an arm's length dealing.

The last question to be considered is whether any prospective distribution receivable by the Fund from the Service Trust will be more than the amount that the Fund might have been expected to derive if the Fund Trustee and the Fund Member had been dealing with each other at arm's length.

In your private-ruling application, you submitted that:

Any income return arising in consequence of [the Fund]'s investment should not be excessive because:

In practical terms all Members (in [the Fund Member]'s case [the Fund]) have an obligation to indemnify the Trust. There is therefore risk associated with the investment in terms of an obligation to make additional contributions;

The fixed entitlement is not readily capable of being sold and in fact is best described as a wasting asset;

The capital value of the expected income stream is subject to a high rate of discount due to factors such as:

(a) Federal and state tax risk factors;

(b) Risk of claim against the Trust, in particular tenant and employee risks;

(c) Longevity risk of the Member in terms of continuity in practice; and

(d) Risk of failure/discontinuance of the professional practice/Trust.

Irrespective of whether the risks you mentioned are valid, in our view they are not relevant in relation to the question being asked. This is because the Fund is merely an Eligible Beneficiary, not a Member of the Service Trust and, as noted before, should not have been the party, in the first place, that paid for the Bond and the Premium and provided the loan to the Service Trust.

With a view to distinguishing the Fund's case from the superannuation fund in Allen, you submitted in your private-ruling application that subsection 295-550(5) of the ITAA 1997 does not apply to the Fund on the following grounds:

· In Allen's Asphalt the superannuation fund "acquired" an entitlement to 100% of the income of the Fixed Trust. In the case of [the Fund] the fixed interest in the Trust carries with it an entitlement to [a specified percentage] of the Trust income;

· In Allen's Asphalt the beneficiaries of the Hybrid Trust were varied to include the Fixed Trust of which the Superannuation Fund was sole beneficiary. In the case of [the Fund] it has acquired a [a specified percentage] interest in the Trust in the course of an arm's length dealing with the Trustee/unitholders (all of whom are arm's length parties);

· In the case of Allen's Asphalt acts of all participating trusts were performed under the effective direction of Mr Allen. In the case of [the Fund] [the Fund Member] only exercised direction with respect to [the Fund] acquiring an interest in the Trust for market value consideration;

· In Allen's Asphalt income which might have been expected to have been distributed to other beneficiaries of the Hybrid Trust was diverted to the Super Fund through the Fixed Trust. In the case of [the Fund] the referrable income properly derived by [the Fund] as the entity which acquired the interest in the Trust for consideration;

· In Allen's Asphalt the Super Fund provided no consideration for its interest in the Fixed Trust or for its entitlement to the income;

· In Allen's Asphalt there was no commercial justification for the Super Fund deriving the income. In the case of [the Fund] there is commercial justification for derivation of any income because the Trust conducts its activities on a commercial basis in accordance with the ATO's guidelines and the Fund] has acquired its interest in the Trust on arm's length terms for the market price.

We are unable to accept these grounds as valid for the following reasons:

(a) in general, given the structure and purpose of the Service Trust it is questionable that the Fund, as an Eligible Beneficiary only, was capable at all of acquiring an interest in the Service Trust as if it were a Member itself and as if it were at equal footing as all the other Members of the Service Trust, let alone a fixed entitlement of a specified percentage to the corpus and/or net income of the Service Trust; and

(b) in particular:

(i) with respect to the first dot point of your submissions, where an entitlement is the outcome of a non-arm's length dealing, whether an entitlement is 100% or a specified percentage is only a question of degree and does not mitigate the fact that the entitlement remains the outcome of a non-arm's length dealing;

(ii) with respect to second dot point of your submissions, while the Fund Member (in their capacity as a Member of the Service Trust) might be at arm's length with the Trustee and/or the other Members of the Service Trust, in so far as his obligations and rights under the Service Trust relative to the other Members of the Service Trust are concerned, the fact that they nominated the Fund as the sole Eligible Beneficiary to receive all distributions from the Service Trust, which distributions:

(A) were attributable to their personal exertions as a Practitioner in conjunction with the Service Trust; and

(b) would otherwise be made to them as a Member of the Service Trust (if they did not nominate any Associate) and be taxed at their personal rate of tax;

shows that the dealing between him/her as a Member of the Service Trust on the one hand and as the sole director of the Fund Trustee on the other was not at arm's length, which is what matters under this private ruling;

(c) with respect to dot points 3 and 5, even if it were accepted that the Fund's outlay of a specified amount could be looked upon as a consideration paid by the Fund to the Fund Member in return for the Fund Member assigning to the Fund their entitlement to all distributions receivable by them from the Service Trust, as noted before the Fund Trustee has not provided any basis or calculation to quantify, on an arm's length basis, the amount of consideration that may objectively be considered as adequate;

(d) with respect to your dot point 4, in as much as the Fund is the sole Eligible Beneficiary, the arrangement for the Fund Member to divert to the Fund their entitlement (as a Member of the Service Trust) to all distributions receivable from the Service Trust is no different in nature from what happened in Allen;

(e) with respect to the last dot point, just as in Allen, the obvious purpose of the Fund Member diverting to the Fund their entitlement to all distributions receivable by them from the Service Trust is to enable any amounts so diverted to be taxed concessionally in the Fund. So the question of whether the Service Trust in fact conducts its activities on a commercial basis in accordance with the ATO's guidelines is irrelevant.

To summarise, the facts available indicate that:

(a) the Fund is or will be deriving income from a scheme or arrangement, the parties to which (the Fund Member and the Fund Trustee) were clearly not dealing with each other at arm's length in relation to the scheme or arrangement; and

(b) the Fund will, for an outlay of a specified amount (which was unnecessary for the Fund to have incurred) and without bearing any further risk, receive an annual distribution from the Service Trust for as long as the Fund Member remains a Member of the Service Trust.

Based on the Service Trust's past records of distributions, any annual distribution receivable by the Fund would appear to be disproportionate to the amount of its one-off outlay.

In a completely arm's length environment, an entity that incurs a nominal outlay (which, in the Fund's case, is not even required to have been incurred by the Fund in the first place) and that bears no commercial risk cannot expect to receive or derive any income. It follows that the receipt of any distribution by the Fund in these circumstances would be greater than expected if the parties had been dealing with each other on an arm's length basis.

We, therefore, have to conclude that subsection 295-550(5) of the ITAA 1997 applies to treat, as non-arm's length income of the Fund, any distribution that the Fund may receive from the Service Trust as an Eligible Beneficiary thereof.

Further issues for you to consider

By making the payment and providing the loan, the Fund Trustee may have contravened paragraph 65(1)(b) of the Superannuation Industry (Supervision) Act 1993. Subsection 65(1) states that:

A trustee or an investment manager of a regulated superannuation fund must not:

(a) lend money of the fund to:

(i) a member of the fund; or

(ii) a relative of a member of the fund; or

(b) give any other financial assistance using the resources of the fund to:

(i) a member of the fund; or

(ii) a relative of a member of the fund.

¹ [1968] AC 553 at 602-602 and 617-618; [1968] 2 WLR 277; [1968] 1 All ER 121

² (1964) 38 ALJR 197; [1965] ALR 803; [1965] AC 694; [1964] 3 WLR 963; [1964] 3 All ER 692; [1964] TR 351; (1964) 108 Sol J 820; (1964) 43 ATC 325; (1964) 112 CLR 12 at 28-29

³ [2005] HCA 53; (2005) 79 ALJR 1724; (2005) 2005 ATC 4925; (2005) 60 ATR 371; [2005] ALMD 8267; [2005] ALMD 8610; (2005) 221 ALR 196; (2005) 224 CLR 98

⁴ [2011] FCA 16; (2011) 2011 ATC 20-235; (2011) 192 FCR 298; [2011] ALMD 4786; [2011] ALMD 4787; [2011] ALMD  4788

⁵ [2000] FCA 981; (2000) 45 ATR 7; (2000) 2000 ATC 4525; (2000) 175 ALR 482; (2000) 102 FCR 15

⁶ (1992) 37 FCR 178; (1992) 107 ALR 407; (1992) 23 ATR 236; (1992) 92 ATC 4192

⁷ (1952) 88 CLR 54; (1952) 26 ALJ 389; [1952] ALR 895; [1952] HCA 52

⁸ 2005] HCA 53; (2005) 79 ALJR 1724; (2005) 2005 ATC 4925; (2005) 60 ATR 371; [2005] ALMD 8267; [2005] ALMD 8610; (2005) 221 ALR 196; (2005) 224 CLR 98

⁹ [2004] HCA 26; (2004) 78 ALJR 875; (2004) 206 ALR 207; (2004) 55 ATR 712; (2004) 2004 ATC 4599; [2004] ALMD 4877; [2004] ALMD 4881; (2004) 217 CLR 216.