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Edited version of private advice
Authorisation Number: 1012649256460
Ruling
Subject: Foreign investment vehicle as trust
Question 1
Will the foreign investment vehicle be considered to be a trust for Australian tax purposes?
Answer:
Yes
Question 2
If the Fund is a trust being an entity that is not covered by Section 12-402(3) of Schedule 1 of the Taxation Administration Act 1953 (TAA 1953) will a unitholder in the Fund (which is not a trust or is an entity covered by Section 12-402(3) of Schedule 1 of the TAA 1953) be treated as a member in an Australian Unit Trust in which the Fund will hold trust units on the basis that the Unitholder will hold an interest in the Australian Unit Trust indirectly through a 'chain of trusts' in accordance with Section 12-402(4)(a) of Schedule 1 of the TAA1953?
Answer:
Yes
This ruling applies for the following period:
1 July 2013 to 30 June 2018
The scheme commences on:
1 July 2013
Relevant facts and circumstances
As provided by the applicant
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 960-100
Taxation Administration Act 1953 Schedule 1
Subsection 12-402(3)
Paragraph 12-402(4)(a)
Reasons for decision
'Trust' is not defined in the ITAA1936 or ITAA 1997. French J in Harmer & Ors v. Federal Commissioner of Taxation (1989) 20 ATR 1461; 89 ATC 5180 stated that a trust 'is notably a definition of a relationship by reference to obligations'. He went on to state that the four essential elements of a trust are:
1. the trustee who holds a legal or equitable interest in the trust property
2. the trust property which must be property capable of being held on trust and which includes a chose in action
3. one or more beneficiaries other than the trustee; and
4. a personal obligation on the trustee to deal with the trust property for the benefit of the beneficiaries, which obligation is also annexed to the property.
The taxpayer satisfies all 4 elements