Private ruling: Unit trust
Date of advice: 15 December 2025
Published: 9 February 2026
Ruling period: 1 July XXXX to 30 June XXXX

Ruling: Q2: Will the Income Unit Holders be taken to pay a dividend to the relevant Unit Trust pursuant to section 109C or section 109D of the Income Tax Assessment Act 1936 (ITAA 1936) when they pay their respective proportion of the Initial Sum to the relevant Unit Trust in return for the issue of their Income Units upon the establishment of the relevant Unit Trust? | A1: No. | Q3: Will there be any direct value shifting implications pursuant to Division 725 of the Income Tax Assessment Act 1997 (ITAA 1997) as a result of the issuing of the Income Units and the Capital Units upon the establishment of the Unit Trusts? | A2: No. | Q4: Will the Income Unit Holders each be a 'qualified person' for the purposes of Division 1A of former Part IIIAA of the ITAA 1936 in relation to dividends paid on shares acquired by the relevant Trustee, where the Trustee has held the shares at risk for 45 days (if the shares are not preference shares) or 90 days (if the shares are preference shares) and no related payment within the meaning of former section 160APHN of the ITAA 1936 will be made in respect of the dividend? | A3: Yes.

Relevant facts and circumstances: It is proposed that Unit Trust A and Unit Trust B (collectively, Unit Trusts) will be established, each with Capital Unit Holders and Income Unit Holders (collectively, Unit Holders). Following execution of the Trust Deeds the Unit Holders will pay the Initial Sum (the amount owed by the Unit Holders for the issue of their respective units upon the establishment of the trust (the Initial Units)). The Initial Sum will form the entirety of the initial Trust Fun Valuations Pursuant to the Unit Trust Deeds, any valuations of the relevant Trust Fund, any particular Property of the Trust Fund or any Units must be undertaken by an independent licensed valuer appointed by the Trustee. The valuer must value any Units in accordance with the Savings Rule, having regard to the effect of the rights attached to and any obligations associated with those Units. The Income Unit Holders are private companies within the meaning of section 103A of the ITAA 1936. The Unit Trusts will each be an associate of the shareholder(s) of their relevant Income Unit Holder within the meaning of section 318 of the ITAA 1936. All investments made by the Unit Trusts will be on an arm's length basis or at market value. The Unit Trusts will, at all times throughout the Ruling Period: • be resident trusts for CGT purposes within the meaning of section 995-1(1) of the ITAA 1997; • each have a valid family trust election in place for the purposes of Schedule 2F to the ITAA 1936; and • not be listed for quotation in the official list of an approved stock exchange, or be a managed investment scheme registered under the Corporations Act 2001 (Cth). Throughout the Ruling Period, no arrangement has been or will be entered into which would result in: a) A 'related payment' under former section 160APHN of the ITAA 1936. b) A Unit Holder having materially diminished risks of loss or opportunities for gain of less than 30% in respect of shares held by the Responsible Entity (refer to former section 160APHM of the ITAA 1936). c) A Unit Holder not being sufficiently exposed to the risk of loss or opportunity for gain in respect of the units in the Trust.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 109C | Income Tax Assessment Act 1936 Section 109D | Income Tax Assessment Act 1936 former Division 1A of Part IIIAA | Income Tax Assessment Act 1997 section 207-150 | Income Tax Assessment Act 1997 Division 725

Reasons for decision: Summary: The Income Unit Holders will not be taken to pay a dividend to the Trust per section 109C or section 109D of ITAA 1936 when they pay their respective proportion of the initial sum to the Trust in return for the issue of the Income Units on the establishment of the Trust. | Detailed Reasoning - Section 109D of the ITAA 1936: Section 109D of the ITAA 1936 provides that a private company is taken to pay a dividend to an entity if the private company loans an amount to the entity during the year that is not fully repaid before lodgment date and the entity is a shareholder in the private company (or an associate of the shareholder) or it is reasonable to conclude that the loan is made because the entity was a shareholder or associate at some time. The meaning of loan for Division 7A of the ITAA 1936 purposes is as follows: In this Division, loan includes: (a) an advance of money; and (b) a provision of credit or any other form of financial accommodation; and (c) a payment of an amount for, on account of, on behalf of or at the request of, an entity, if there is an express or implied obligation to repay the amount; and (d) a transaction (whatever its terms or form) which in substance effects a loan of money. In this case there will be no obligation for the Unit Trust to repay an amount to the corporate Income Unit Holders. The payment arises from the subscription for the issue of Income Units. The Commissioner does not consider that the payment for Income Units is a 'loan'. Thus, section 109D of the ITAA 1936 will not apply to the moneys paid for the issue of Income Units. | Detailed Reasoning - Section 109C of the ITAA 1936: Section 109C of the ITAA 1936 provides that a payment made by a private company to a shareholder, or shareholder's associate, will be taken to be a dividend. However, section 109J of the ITAA 1997 states that: A private company is not taken under section 109C to pay a dividend because of the payment of an amount, to the extent that the payment: (a) discharges an obligation of the private company to pay money to the entity; and (b) is not more than would have been required to discharge the obligation had the private company and entity been dealing with each other at arm's length. In this case, the relevant payment will be made from the corporate Income Unit Holders to discharge the obligation of the Income Unit Holders for their subscription of units. It is not considered that this amount is more than would have been required to discharge the obligation in arm's length dealings. As such, 109J applies such that 109C will not apply to the relevant payment. | Summary: There will not be any direct value shifting implications pursuant to Division 725 of ITAA 1997 because of the issuing of the Income Units and the Capital Units upon the establishment of the Trust. | Detailed Reasoning - Detailed reasoning: Section 725-145 of the ITAA 1997 provides that there is a direct value shift under a scheme where the scheme causes a decrease in the market value of one or more of the relevant interests, which include equity or loan interests in a unit trust, and: • one or more of the interests are issued at a discount, and/or • there is an increase in the market value of one or more of the interests. In this case, there is no evidence that there will be any scheme that would cause a decrease in the market value of any of the Units. Once the subscription moneys are paid into the Trust, the Initial Sum will compose the entirety of the Trust Fund. There is very limited ability to change the rights of the Units. As such, there will be no direct value shift under section 725-145 upon the issue of the Uni | Summary: As the Unit Trusts will have valid family trust elections in place, each Income Unit Holder will be a 'qualified person' for the purposes of Division 1A of former Part IIIAA of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: Relevantly, paragraph 207-150(1)(a) of the ITAA 1997 denies a tax offset if the entity to whom a franked distribution flows indirectly is not a qualified person in relation to the distribution for the purposes of former Division 1A of Part IIIAA of the ITAA 1936. In this case then, as long as the Trustee satisfies the at-risk requirement under section 160APHM of the ITAA 1936 for the entire relevant holding period and makes no related payment within the meaning of section 160APHN of the ITAA 1936 will be made, and the Unit Trust makes the requisite family trust election, subsection 160APHL(10) of the ITAA 1936 will not apply to attribute a short position to the beneficiaries. Accordingly, the beneficiaries will retain a long position of +1 under subsection 160APHL(7), and franking benefits can flow through to the Income Unit Holders.

Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar .