Public unit trusts
The transferor trust measures do not apply to arm's length transfers to non-resident public unit trusts. [sub-subparagraph 102AAT(1)(a)(i)(B)]
From the 1992-93 income year you have been exempt from an interest charge on amounts received, or which have been applied for your benefit, that are attributable to the income or profits of a non-resident trust estate which at all times during the year was:
- a public unit trust under the transferor trust measures [Division 6AAA], and
- not a controlled foreign trust within the meaning of Part X. [subsection 102AAM(1C)]
A unit trust will be a public unit trust if, at any time during the year, any of the units in the unit trust were listed on a stock exchange in Australia or elsewhere or were offered to the public.
In addition, a unit trust will be a public unit trust if, at all times during the year, the units in the unit trust were held by 50 or more persons. A unit trust will not be treated as a public unit trust where 20 or fewer persons hold 75% or more of the beneficial interests of the income or property of the trust. [section 102ABF]
You must take the following into account when deciding whether a unit trust is a public unit trust at all times during the year of income.
- An entity and its associates are taken to be one person.
- Where units in the trust are held by the trustee of another trust estate that is a public unit trust at all times during the income year, a person who has a beneficial interest in the second trust estate is taken to hold those units. [subsection 102AAF(3)]
A public unit trust cannot also be a controlled foreign trust (CFT). A trust estate will be a CFT if there is an eligible transferor in respect of the trust - that is, if an Australian entity or a controlled foreign partnership, CFT or CFC transferred value to the trust estate:
- in the case of a discretionary trust estate, at any time [section 347]
- in the case of a non-discretionary trust estate, after 12 April 1989 for non-arm's length consideration. [sections 342 and 348]
A trust estate will also be a CFT if there is a group of five or fewer Australian entities with a 1% interest in the trust estate totalling 50% or more. [section 342]
When you are working out if an Australian entity has a 1% interest in the trust, include the direct and indirect interests of the entity's associates in the same trust or trusts.
Deceased estates
Generally, where property of a trust estate is paid to or applied for the benefit of a beneficiary, an amount - unless it has already been taxed in the hands of the trustee or beneficiary - is included in the assessable income of that beneficiary. Under those circumstances, an interest charge usually applies to amounts that are included in the assessable income of that beneficiary. [sections 99B and 102AAM]
However, from the 1992-93 income year, a beneficiary has been exempt from the interest charge on amounts received from the estate of a deceased person where those amounts are paid to, or applied for the benefit of, the beneficiary within three years after the death of that person. [subsection 102AAM(1B)]