ATO ID 2003/800: Associates: A partnership as an associate of a natural person
Date of decision: 30 June 2003
Year of income: Year ended 30 June 2003 Year ending 30 June 2004
Business line: Private Groups and High Wealth Individuals

Issue
Is a partnership, in which a company acting as trustee is a partner, an associate of shareholders of that company where the shareholders are natural persons?

Decision
No. A partnership, in which a company acting as trustee is a partner, is not an associate of shareholders of that company where the shareholders are natural persons.

Facts
A Pty Ltd ('the company') is trustee of the B trust ('the trust'). The company has two shareholders ('the shareholders'). The shareholders are natural persons. The company and the shareholders are beneficiaries of the trust. The company, as trustee of the trust, is a partner ('the partner') in D ('the partnership'). The other partner is otherwise unrelated to the company, the trust and the shareholders.

Reasons for decision
Summary: As the shareholders of the company are natural persons, subsection 318(1) of the Income Tax Assessment Act 1936 (ITAA 1936) is relevant. Under subsection 318(1) of the ITAA 1936 the associates of a natural person (other than in the capacity of trustee) are: The relevant paragraph is paragraph 318(1)(b) of the ITAA 1936. As the shareholders are not partners in the partnership, the partnership is not an associate of the shareholders under paragraph 318(1)(b) of the ITAA 1936.

Legislative references: Income Tax Assessment Act 1936 subsection 318(1)
Subject references: Associate Partnerships