Private ruling: Other offsets
Date of advice: 24 April 2026
Published: 13 July 2026
Ruling period: Income year ending 30 June 2026 | Income year ending 30 June 2027 | Income year ending 30 June 2028

Ruling: Q1: Will the Commissioner exercise the discretion in former subsection 160APHL(14) of the Income Tax Assessment Act 1936 ( ITAA 1936 ) to treat the Unitholders of the Trust as having a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding? | A1: Yes. | Q2: Does Part IVA of ITAA 1936 apply to the arrangement under which the Unitholders of the Trust receive franked distributions in accordance with their fixed entitlements, including the holding structure, income allocation, and the proportional distribution of franking credits? | A2: No.

Relevant facts and circumstances: The Trust The Trust is a unit trust established by a deed of trust ( Deed ) on XX XX 20XX. A Pty Ltd ( the Trustee ) is the trustee of the Trust. The Trust: • is an Australian resident for tax purposes; • has not made a family trust election; • is not a managed investment scheme for the purposes of the Corporations Act 2001 ; • is not listed on the Australian Securities Exchange; and • does not have market capitalisation. The Trustee: The Trust Fund The Trustee wholly-owns a number of companies ( Operating companies ) and unit trusts ( Property-holding unit trusts )(collectively, the A Group ). The Operating companies carry on a business. Each Property-holding unit trust was established to acquire, develop and hold freehold properties within the A Group. The Trustee's shareholding in the Operating companies and units in the Property-holding unit trusts comprises the Trust Fund. The Trust holds no other assets. The Operating companies have paid franked dividends in proportion to the shareholdings held by the Trustee. No streaming or selective dividend payments have been made. The Unitholders The Trust has a single class of ordinary units issued. The units are owned by discretionary trusts (eacha Unitholder and collectively the Unitholders ). The Unitholders are controlled by unrelated business partners and act with each other on an arm's length basis. Funding arrangements B Pty Ltd ( B ) and the Trustee are under common ownership and control and therefore are related parties. B is part of the A Group. B provides funding and support services to the Operating companies within the A Group. B acts as the central management and treasury entity for the A Group. Its activities include: • providing centralised treasury and funding support to the Operating companies and Property-holding unit trusts; • managing group cash flows and working capital; • providing administrative support services, including accounting, payroll, HR coordination, and lease administration; and • managing financing arrangements relating to operations and development. The Trust provides funding to B ( Funding Arrangement 1 ) to fund the working capital requirements of the business operated by the A Group. The Trust also provides funding to the Property-holding unit trusts ( Funding Arrangement 2 ) to fund projects undertaken by each trust. Each of the Funding Arrangements are conducted on commercial terms, including: • documented loan agreements; • interest rates set at arm's length, reflective of prevailing market rates at the time of the arrangement; • clearly defined repayment terms and maturity dates; • regular interest payments and principal repayments in accordance with the agreed terms; and • no waivers, capitalisations, or forbearance that would otherwise imply non-commercial treatment. Both Funding Arrangement 1 and 2 are structured to serve operational and/or investment purposes, such as enabling group entities to meet working capital needs and undertake capital expenditure. The terms of each Funding Arrangement mirror what would reasonably be expected between independent parties dealing at arm's length. Unitholder interests Each Unitholder holds a proportional interest in the Trust Fund vested in them under clause X of the Deed. Each Unitholder holds a beneficial interest in the Trust Fund but not in any specific asset under clause X of the Deed. The Trustee is to distribute the net income of the Trust to the Unitholders proportionately at the end of each Accounting Period under clause X of the Deed. The Trustee may determine to distribute all or part of the capital of the Trust to the Unitholders proportionately under clause X of the Deed. To date, the Trustee has not exercised any power to defeat a Unitholder's income or capital entitlement. Classes of units Clause X of the Deed gives the Trustee the power to divide units into classes or reclassify units to new or existing classes. In exercising the power under clause X of the Deed, the Trustee may create new unit classes with different rights, privileges, conditions or restrictions. To date, the Trustee has not exercised any power to reclassify units into different classes and no different classes of units have been issued. The Unitholders currently do not have any special rights, privileges, conditions or restrictions. Issue of units Clause X of the Deed deals with the issue of new units in the Trust. Clause X of the Deed deals with the price of new units issued. To date, no new units in the Trust have been issued. Redemption of Units The Trustee has powers to redeem units in the Trust under clause X of the Deed. The price at which units are redeemed is prescribed in clause X of the Deed. The process for redeeming units can be waived by unanimous Unitholder consent under clause X of the Deed. To date, no units in the Trust have been redeemed. Amendment to the Deed Clause X of the Deed gives the power to the Trustee to amend the Deed, subject to clause X of the Deed. To date, no amendments have been made to the Deed. Termination of the Trust The Trust may be terminated by the Trustee prior to vesting with at least 50% consent from the Unitholders under clause X of the Deed. The Trustee will terminate the Trust prior to vesting at the direction of all Unitholders under clause X of the Deed. Clause X deals with the Trustee's obligations on termination of the Trust. Other matters As at 30 June 2025, the Trust had carried forward tax losses of $0. To date, no payments have been made that would be related payments under former section 160APHN of the ITAA 1936. The Commissioner previously issued a private ruling to the Trustee exercising the discretion in former subsection 160APHL(14) of the ITAA 1936 to treat the Unitholders of the Trust as having a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding for the 2022 to 2025 income years. Assumptions Throughout the income years ending 30 June 2026 to 30 June 2028 (Ruling Period): 2. Existing units in the Trust will not be reclassified. 3. Further units in the Trust will not be issued. 4. The Unitholders will not sell or dispose of their unitholding. 5. No units in the Trust will be redeemed. 6. The Trust will not be terminated. 7. No amendments will be made to the Deed. 8. No payments will be made that have the effect of transferring the benefit of a dividend and related franking credits to another person. 9. The Trust will not have any tax losses, bad debts, or debt/equity swap losses; 10. No arrangement has been or will be entered into that would result in: • a related party payment under former section 160APHN of the ITAA 1936; • a Unitholder having materially diminished risks of loss or opportunities for gain of less than 30% in respect of shares held by the Trustee (refer to former section 160APHM of the ITAA 1936); • a Unitholder not being sufficiently exposed to the risk of loss or opportunity for gain in respect of the shares held by the Trustee, as explained by ATO Interpretative Decision ATO ID 2014/10 [1] ; • Taxpayer Alerts TA 2015/1 [2] , TA 2015/2 [3] or TA 2018/1 [4] applying; • the Commissioner making a determination under the general anti-avoidance rules and particularly paragraph 177EA(5)(b) of ITAA 1936 which relates to disposing of company shares in order for anyone to obtain franking benefits; • any of the paragraphs 207-150(1)(c) to (h) of the Income Tax Assessment Act 1997 ( ITAA 1997 ) (inclusive) applying; or • fraud or evasion.

Relevant legislative provisions: Income Tax Assessment Act 1936 former subsection 160APHL(10) | Income Tax Assessment Act 1936 former subsection 160APHL(11) | Income Tax Assessment Act 1936 former subsection 160APHL(12) | Income Tax Assessment Act 1936 former subsection 160APHL(13) | Income Tax Assessment Act 1936 former subsection 160APHL(14) | Income Tax Assessment Act 1936 former paragraph 160APHL(14)(a) | Income Tax Assessment Act 1936 former paragraph 160APHL(14)(b) | Income Tax Assessment Act 1936 former paragraph 160APHL(14)(c) | Income Tax Assessment Act 1936 former subparagraph 160APHL(14)(c)(i) | Income Tax Assessment Act 1936 former subparagraph 160APHL(14)(c)(ii) | Income Tax Assessment Act 1936 former subparagraph 160APHL(14)(c)(iii) | Income Tax Assessment Act 1936 former subparagraph 160APHL(14)(c)(iv) | Income Tax Assessment Act 1936 former section 160APHM | Income Tax Assessment Act 1936 former section 160APHN | Income Tax Assessment Act 1936 Part IVA | Income Tax Assessment Act 1936 section 177D | Income Tax Assessment Act 1936 section 177EA | Income Tax Assessment Act 1936 subsection 177EA(3) | Income Tax Assessment Act 1936 paragraph 177EA(3)(a) | Income Tax Assessment Act 1936 paragraph 177EA(3)(b) | Income Tax Assessment Act 1936 paragraph 177EA(3)(c) | Income Tax Assessment Act 1936 paragraph 177EA(3)(d) | Income Tax Assessment Act 1936 paragraph 177EA(3)(e) | Income Tax Assessment Act 1936 paragraph 177EA(5)(b) | Income Tax Assessment Act 1936 subsection 177EA(17) | Income Tax Assessment Act 1936 section 177F | Income Tax Assessment Act 1997 paragraph 207-150(1)(c) | Income Tax Assessment Act 1997 paragraph 207-150(1)(d) | Income Tax Assessment Act 1997 paragraph 207-150(1)(e) | Income Tax Assessment Act 1997 paragraph 207-150(1)(f) | Income Tax Assessment Act 1997 paragraph 207-150(1)(g) | Income Tax Assessment Act 1997 paragraph 207-150(1)(h) | Corporations Act 2001 section 601GC | Corporations Act 2001 paragraph 601GC(1)(b)

Reasons for decision: Detailed Reasoning - Question 1: Will the Commissioner exercise the discretion in former subsection 160APHL(14) to treat the Unitholders of the Trust as having a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding? | Summary: The Commissioner will exercise the discretion in former subsection 160APHL(14). | Detailed Reasoning - Detailed reasoning: Fixed interest Former subsection 160APHL(11) states that for the purposes of former subsection 160APHL(10), the taxpayer's interest in the trust holding is a 'fixed interest' to the extent that 'the interest is constituted by a vested and indefeasible interest in so much of the corpus of the trust as is comprised by the trust holding'. (Note: The terms 'corpus' and 'capital' are considered to be synonymous for current purposes.) Vested interest An interest is 'vested' if it is vested in interest or vested in possession. An interest is vested in possession when it gives its holder a present right of present enjoyment, whereas an interest is vested in interest if it gives its holder a present right to future enjoyment (see Dwight v Commissioner of Taxation 92 ATC 4192 per Hill J at [4202-4203]). Unitholders have a beneficial interest in the income and corpus of the Trust vested in them under provisions of the Deed. Therefore, Unitholders have a vested interest in the corpus of the Trust. Indefeasible interest The word 'indefeasible' is not defined in the ITAA 1936 or ITAA 1997 so takes its ordinary meaning when applied to an interest, that is that the interest cannot be terminated, invalidated or annulled (see Colonial First State Investments Ltd v. Commissioner of Taxation [2011] FCA 16). The vested interest of the Unitholders in the corpus of the Trust can be defeased by the following provisions in the Deed: | Detailed Reasoning - Interest not vested and indefeasible: Since the Unitholders do not have a vested and indefeasible interest in the corpus of the Trust as is comprised by the trust holding (being the Trustee's ownership of shares) under former subsection 160APHL(11), the Unitholders of the Trust do not have a fixed interest in the trust holding for the purposes of former subsection 160APHL(10). However, former subsection 160APHL(14) gives the Commissioner a discretion to determine an interest to be vested and indefeasible. Commissioner's discretion under former subsection 160APHL(14) Former subsection 160APHL(14) states: If: (a) the taxpayer has an interest in so much of the corpus of the trust as is comprised by the trust holding; and (b) apart from this subsection, the interest would not be a vested or indefeasible interest; and (c) the Commissioner considers that the interest should be treated as being vested and indefeasible, having regard to: (i) the circumstances in which the interest is capable of not vesting or the defeasance can happen; and (ii) the likelihood of the interest not vesting or the defeasance happening; and (iii) the nature of the trust; and (iv) any other matter the Commissioner thinks relevant; the Commissioner may determine that the interest is to be taken to be vested and indefeasible. Former paragraph 160APHL(14)(a) - the taxpayer has an interest in so much of the corpus of the trust as is comprised by the trust holding Former paragraph 160APHL(14)(a) contains a 'threshold' condition that the taxpayer has an interest in the corpus of the Trust. An interest for these purposes is considered to be a 'vested interest' and not a 'contingent' interest. An example of a contingent interest is one that relies upon the exercise, or the non-exercise, of a trustee's discretion in relation to the income or capital of a trust. As discussed, the Unitholders have a vested interest in the corpus of the Trust under clauses of the Deed. The condition in former paragraph 160APHL(14)(a) is therefore met. Former paragraph 160APHL(14)(b) - apart from this subsection, the interest would not be a vested or indefeasible interest This condition is met since the interests of the Unitholders are defeasible under clauses of the Deed. Former paragraph 160APHL(14)(c) - the Commissioner considers the interest to be vested and indefeasible having regard to: (i) the circumstances in which the interest is capable of not vesting or the defeasance can happen; and (ii) the likelihood of the interest not vesting or the defeasance happening; and (iii) the nature of the trust; and (iv) any other matter the Commissioner thinks relevant. Former subparagraphs 160APHL(14)(c)(i) and (ii): the circumstances in which the defeasance can happen and the likelihood of the defeasance happening The interests of Unitholders can be defeated in the circumstances described above. It is considered that the likelihood of the circumstances giving rise to the defeasance is low given the relevant powers required to be exercised to defeat such interests practically requires the consent of all the Unitholders or Unitholders to act against their own interests. Furthermore, in accordance with the following assumptions forming part of this ruling, the circumstances in which the interests of Unitholders can be defeated will not occur during the Ruling Period: • existing units in the Trust will not be reclassified; • further units in the Trust will not be issued; • no units in the Trust will be redeemed; and • no amendments will be made to the Deed. Former subparagraph 160APHL(14)(c)(iii) - the nature of the trust The Trust is a unit trust with X Unitholders who are unrelated discretionary trusts. Former subparagraph 160APHL(14)(c)(iv) - any other matter the Commissioner thinks relevant The discretion in former subsection 160APHL(14) relates to the utilisation of a tax offset for a share of the franking credit on a franked distribution. It was introduced as a part of integrity measures aimed at defeating franking credit trading schemes. The Explanatory Memorandum to Taxation law Amendment Bill (No.2) 1999, which accompanied the introduction of former subsection 160APHL(14), outlined the purpose of the integrity measures: 4.6 One of the underlying principles of the imputation system is that the benefits of imputation should only be available to the true economic owners of shares, and only to the extent that those taxpayers are able to use the franking credits themselves: a degree of wastage of franking credits is an intended feature of the imputation system. 4.7 In substance, the owner of shares is the person who is exposed to the risks of loss and opportunities for gain in respect of the shares. However, franking credit trading schemes allow persons who are not exposed, or have only a small exposure, to the risks and opportunities of share ownership to obtain access to the full value of franking credits, which often, but for the scheme, would not have been used at all, or would not have been fully used. Some of these schemes may operate over extended periods, and typically involve a payment related to the dividend which has the effect of passing its benefit in economic terms to a counterparty. The schemes therefore undermine an underlying principle of imputation. Therefore, when considering the exercise of the discretion in former subsection 160APHL(14), the Commissioner must be mindful not to undermine the intended effect of the integrity measures themselves. In this regard, there is no arrangement aimed at undermining the purpose of the franking credit integrity rules. Further, the purpose of the integrity measures will not be undermined due to the assumptions forming part of this ruling. Conclusion The Commissioner will exercise the discretion under former subsection 160APHL(14) to treat the Unitholders as having a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding. | Detailed Reasoning - Question 2: Does Part IVA apply to the arrangement under which the Unitholders of the Trust receive franked distributions in accordance with their fixed entitlements, including the holding structure, income allocation, and the proportional distribution of franking credits? | Summary: The arrangement as described is not a scheme to which section 177EA of Part IVA nor section 177D of Part IVA applies. | Detailed Reasoning - Detailed Reasoning: Franking credit streaming - section 177EA Section 177EA is a general anti-avoidance provision which supports the operation of the imputation system with the purpose of ensuring that the benefits of the imputation system flow to the economic owner of the share which is the source of the franked distribution. The section is directed at schemes involving the transfer of franking credits on a dividend from entities that cannot fully use them to entities that can. If the section applies, the Commissioner may debit the company's franking account or deny the franking credit benefit to the recipient of the dividend. Specifically, subsection 177EA(3) provides that for section 177EA to apply, the following must be present: • there is a scheme for the disposition of shares, or interest in shares, in a company (paragraph 177EA(3)(a)); • a franked dividend has been paid, or is expected to be paid, directly or indirectly (paragraphs 177EA(3)(b) and (c)); • the relevant taxpayer would, or could reasonably be expected to, receive imputation benefits from the distribution (paragraph 177EA(3)(d)); and • having regard to relevant circumstances of the scheme (as provided for in subsection 177EA(17)), it would be concluded that the scheme was entered into for the non-incidental purpose of enabling the relevant taxpayer to obtain an imputation benefit (paragraph 177EA(3)(e)). The payment of franked dividends by the Operating companies to the Trust and from the Trust to the Unitholders isnot considered to be a scheme to which section 177EA applies. Scheme entered into for the dominant purpose of obtaining a tax benefit - section 177D Section 177D provides that Part IVA applies to a scheme, or any part of the scheme, entered into or carried out by a person for the dominant purpose of enabling a taxpayer to obtain a tax benefit in connection with the scheme. If Part IVA applies to a scheme, the Commissioner can make a determination under section 177F to cancel the tax benefit obtained under the scheme. It is considered that the present arrangement is not sufficient to engage section 177D having regard to the scheme, namely: • the manner in which Unitholders receive their franked distributions in accordance with their fixed entitlements; • the holding structure involving the use of the unit trust as the holding vehicle for investments (i.e. shares in the Operating companies and units in the Property-holding unit trusts); • the allocation of trust income to Unitholders; and • the proportional distribution of franking credits to Unitholders. This conclusion is limited to the scheme as described and may not necessarily apply to any wider scheme or arrangement involving members of the A Group (such as the Funding Arrangements) and the Unitholders. [1] Income Tax: Entitlements to franking credits in an employee remuneration arrangement: Commissioner's discretion. [2] Dividend stripping arrangements involving the transfer of private company shares to a self-managed superannuation fund. [3] Franked distributions funded by raising capital to release franking credits to shareholders. [4] Structured arrangements that provide imputation benefits on shares acquired on a limited risk basis around ex-dividend dates.

is not a trustee of any other trusts; | has a director who is an Australian resident for tax purposes; | is not an Australian Financial Services License holder; and | is not subject to any regulation by the Australian Prudential Regulation Authority or any other Australian Federal Government authority. | Any distributions and related franking credits will be made proportionate to the number of units held by the Unitholders. | All transactions between the Trust and related parties are, and will continue to be, conducted on arm's length terms. | clause X relating to the Trustee's power to reclassify units into different classes; | clauses X and X relating to the Trustee's power to issue additional units in the Trust; | clauses X and X relating to the Trustee's power to redeem units in the Trust; and | clause X relating to the Trustee's power to amend the Deed.