Private ruling: Trust losses and consolidation
Date of advice: 20 January 2026
Published: 9 March 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Unitholders of the Trust have fixed entitlements to all of the income and capital of the Trust as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') and subsection 272-5(1) of Schedule 2F to the Income Tax Assessment Act 1936 ('ITAA 1936')? | A1: No. | Q2: If the answer to Question 1 is no, will the Commissioner exercise the discretion in subsection 272-5(3) of Schedule 2F to the ITAA 1936 to treat the Unitholders of the Trust as having fixed entitlements to all of the income and capital of the Trust? | A2: Yes. | Q3: Will the losses made by the Trust for the income years ended 30 June 20XX to 30 June 20XX be transferred at the joining time from the Trust to A Co pursuant to section 707-120 of the ITAA 1997? | A3: Yes.

Relevant facts and circumstances: The Trust The Trust is a unit trust that was established by the Trust Deed on XXXX. The Trust Deed has never been amended. The Trustee is the sole trustee of the Trust and has been since the Trust's establishment. There have been no other directors or secretaries of the Trustee. There is no expectation that the directors or shareholders of the Trustee will change during the Ruling Period. The Trust is a resident of Australia for taxation purposes. Investments in the Trust have not required a PDS to be issued. The Trustee has never exercised a power to defeat a Unitholder's interest in the income or capital of the Trust. Units and Unitholders The original Unitholder of the Trust was issued with the initial Units. Although Units have since been issued to other Unitholders, as described below, since XXXX, the XXXX Trust and the XXXX Trust have together directly held more than 50% of the Units. a. Both the XXXX Trust and the XXXX Trust have made family trust elections. The number of Unitholders has increased since the establishment of the Trust. All Unit issues, redemptions, and transfers are conducted at a price based on the net asset value at the time of the relevant event. The price for the issuance of new Units is determined according to the Trust Deed, which provides that the price of new Units shall be calculated by the Trustee on the basis of the value of the net assets of the Trust Fund determined in accordance with the provisions of this sub-clause divided by the total number of Units issued prior to the issue of the new Units applied for. There is no Unitholder agreement, or any other equivalent agreement, in place. Tax Losses Tax Losses have been incurred in relation to the trading activities of the Trust. Further Tax Losses may be incurred during the Ruling Period. Proposed Restructure It is proposed that the following steps, collectively referred to as the Proposed Restructure, will be undertaken in the income year ended 30 June 20XX: a. a new public company limited by shares (referred to as A Co) will be established; b. at a time referred to as the Completion Time, the Unitholders will transfer their Units to A Co and, in exchange, A Co will issue Shares to each Unitholder so that after the issue of Shares, each former Unitholder has Shares of a whole number and in the same percentage as the Units that they previously owned in the Trust, and nothing else; c. at and immediately after the Completion Time, the Unitholders will own all of the Shares in A Co; and d. A Co will choose that section 615-65 of the ITAA 1997 applies, within two months after the Completion Time. A Co A Co will be established and operated on the following basis: a. for the purposes of item 1 of the table in subsection 703-15(2) of the ITAA 1997, A Co will: i. have its taxable income taxed at the corporate tax rate; ii. be an Australian resident (and not a prescribed dual resident); iii. not be a wholly-owned subsidiary of another entity; and b. for the purposes of the table in subsection 703-20(2) of the ITAA 1997: i. the total ordinary income and statutory income of A Co will not be exempt from income tax under Division 50 of the ITAA 1997; ii. A Co will not be a company that is: A. an approved credit union or a recognised medium credit union; B. a CCIV; or C. a pooled development fund. A Co will make a choice under section 703-50 of the ITAA 1997 in writing that A Co and the Trust (which will be a consolidatable group) is taken to be consolidated on and after the day on which the Completion Time occurs (ie. the Completion Day). The Shares will carry an equal right to receive dividends that may be paid by A Co and will carry an equal right to receive distributions of paid-up share capital of A Co in the event of any return of capital from A Co to its shareholders. The Shares issued by A Co will not be redeemable shares. Immediately after the Completion Time, the Shares will be the one and only class of shares in A Co. The Trust For the purposes of item 2 of the table in section 703-15(2) of the ITAA 1997: a. the Trust is not and will not be a non-profit company (as defined in the Income Tax Rates Act 1986 (Cth) ); b. the Trust is and will be a unit trust, and not a public trading trust, that is a resident trust estate and a resident trust for CGT purposes; and c. following the Proposed Restructure, the Trust will be a wholly-owned subsidiary of A Co. For the purposes of the table in subsection 703-20(2) of the ITAA 1997: a. the total ordinary income and statutory income of the Trust is not and will not be exempt from income tax under Division 50 of the ITAA 1997; and b. the Trust is not and will not be: i. a complying superannuation entity; ii. a non-complying approved deposit fund; iii. a non-complying superannuation fund; or iv. a CCIV sub-trust fund. At all times in the Test Period, the Trust will not have been: a. a 'widely held unit trust' for the purposes of section 272-105 of Schedule 2F to the ITAA 1936; or b. an 'excepted trust' for the purposes of section 272-100 of Schedule 2F to the ITAA 1936. No scheme to take advantage of deductions exists as set out in Division 270 of Schedule 2F to the ITAA 1936. Other Matters Section 272-35 of Schedule 2F to the ITAA 1936 will not have application to the arrangement. The arrangement will not involve the trafficking of the tax benefit of a tax loss, bad debt deduction or debt/equity swap deduction. Besides the relevance to the recoupment of Tax Losses, the existence of 'fixed entitlements' as per the meaning of that term in section 272-5 of Schedule 2F to the ITAA 1936 will not have any other relevance to the Trust.


Reasons for decision: Summary: The Unitholders of the Trust do not have fixed entitlements to all of the income and capital of the Trust as defined in subsection 995-1(1) of the ITAA 1997 and subsection 272-5(1) of Schedule 2F to the ITAA 1936. | Detailed Reasoning - Detailed reasoning: The definition of 'fixed entitlement' in subsection 995-1(1) of the ITAA 1997 provides that an entity has a fixed entitlement to a share of the income or capital of a trust 'if the entity has a fixed entitlement to that share within the meaning of Division 272 in Schedule 2F to the [ITAA 1936].' Subsection 272-5(1) of Schedule 2F to the ITAA 1936 provides the following: If, under a trust instrument, a beneficiary has a vested and indefeasible interest in share of income of the trust that the trust derives from time to time, or the capital of the trust, the beneficiary has a fixed entitlement to that share of the income or capital. In relation to when an interest will be defeasible, subsection 272-5(2) of Schedule 2F to the ITAA 1936 ('the Savings Rule') provides the following: If: (a) a person holds units in a unit trust; and (b) the units are redeemable or further units are able to be issued; and (c) if units in the unit trust are listed for quotation in the official list of an approved stock exchange - the units held by the person will be redeemed, or any further units will be issued, for the price at which other units of the same kind in the unit trust are offered for sale on the approved stock exchange at the time of the redemption or issue; and (d) if the units are not listed as mentioned in paragraph (c) - the units held by the person will be redeemed, or any further units will be issued, for a price determined on the basis of the net asset value, according to Australian accounting principles, of the unit trust at the time of the redemption or issue; then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the person's interest, as a unit holder, in the income or capital of the unit trust is defeasible. An essential requirement of the definition in subsection 272-5(1) of Schedule 2F to the ITAA 1936 is that there is a trust instrument that gives rise to the beneficiary's vested and indefeasible interest. In paragraph 11 of Practical Compliance Guideline PCG 2016/16 Fixed entitlements and fixed trusts ('PCG 2016/16'), the Commissioner accepts that a 'trust instrument' includes a deed or constitution as supported by documentation. Here, the Trust was settled via the Trust Deed. The Trust Deed will be a trust instrument for the purposes of subsection 272-5(1) of Schedule 2F to the ITAA 1936. The terms 'vested', 'indefeasible', and 'vested and indefeasible' are not defined in the taxation legislation and takes its ordinary meaning. The Explanatory Memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 ('the EM') provides background into when an interest will be vested, and when a vested interest will be indefeasible. Paragraph 13.4 of the EM states that a person has a vested interest in something if the person has a present right relating to the thing. This is contrasted with a contingent interest, where an event must occur before the interest becomes vested. Paragraph 13.7 of the EM states that a vested interest is indefeasible where, in effect, it is not able to be lost. In contrast, a vested interest is defeasible where it is subject to a condition subsequent that may lead to the entitlement being divested. A condition subsequent is an event that could occur after the interest is vested that would result in the entitlement being defeated, for example, on the occurrence of an event or the exercise of a power. In Colonial First State Investments Limited v. Commissioner of Taxation ('Colonial') , the Federal Court considered the meaning of vested and indefeasible, with Stone J stating that the ordinary meaning of an indefeasible interest is one that cannot be terminated, invalidated or annulled. PCG 2016/16 also discusses the meaning of vested interests and indefeasible interests. Paragraph 13 of PCG 2016/16 states that an interest is vested if it is vested in interest or vested in possession. Paragraph 15 of PCG 2016/16 states that an interest is defeasible if it can be defeated by the actions of one or more persons, or by the occurrence of one or more subsequent events. For example, an interest of a default beneficiary in the income or capital of a trust is a defeasible interest. Paragraph 16 of PCG 2016/16 provides examples of powers in trust instruments that can cause a beneficiary's interest to be defeasible: a. Broad powers to amend the trust instrument. b. Powers to issue new units after the trust is settled, or to redeem existing units. c. A power to reclassify existing units so that they do not all have equal rights to receive the income and capital of the trust. d. A power to classify receipts as being on income or capital account where the units that have been issued do not have all the same rights to receive the income and capital of the trust. e. A power to appoint a beneficiary' interest in the income or capital of the trust to another beneficiary. f. A power to settle or appoint any part of the corpus of the trust to a new trust with different beneficiaries. g. A power to enforce the forfeiture or cancellation of partly paid units due to the non-payment of a call except where such partly paid units would be void ab initio . In determining whether the Unitholders of the Trust have a vested and indefeasible interest in a share of income or capital of the Trust, the first step is to ascertain the terms of the Trust. The High Court recently stated the following in CPT Custodians Pty Ltd v. Commissioner of State Revenue (Vic); Commissioner of State Revenue (Vic) v. Karingal 2 Holdings Pty Ltd : '... a priori assumptions as to the nature of unit trusts under the general law and principles of equity [will] not assist and would be apt to mislead. All depends, as Tamberlin and Hely JJ put it in Kent v SS "Maria Luisa" (No 2) , upon the terms of the particular trust. The term "unit trust" is the subject of much exegesis by commentators. However, "unit trust", like "discretionary trust", in the absence of an applicable statutory definition, does not have a constant, fixed normative meaning which dictate the application to particular facts of the [relevant statutory definition]...' Here, it is the terms of the Trust Deed that require examination. Vested interest in a share of the income or capital of the Trust For the purposes of subsection 272-5(1) of Schedule 2F to the ITAA 1936, it is accepted that the Trust Deed provides the Unitholders with a vested interest in the income and capital of the Trust. It is also accepted that the beneficial interest in the Trust Fund is vested in the Unitholders. Indefeasible interest in a share of the income or capital of the Trust In determining whether the vested interests of the Unitholders in a share of the income or capital of the Trust are indefeasible, the Trust Deed has been considered: As noted in paragraph 16 of PCG 2016/16, the power to issue new units and redeem existing units is an example of a power in a trust instrument that can cause a beneficiary's interest to be defeasible. The Trust Deed gives the Trustee the power to issue new Units. There is no stipulated requirement that the price be determined according to Australian accounting principles. Similarly, upon request of a Unit Holder, the Trust Deed does not stipulate that the price upon which the Unit repurchase price is calculated is to be in accordance with Australian accounting principles. Accordingly, the Savings Rule in subsection 272-5(2) of Schedule 2F to the ITAA 1936 will not be satisfied. As noted in paragraph 16 of PCG 2016/16, a power to reclassify existing units so that they do not all have equal rights to receive the income and capital of the trust is a power that can cause a beneficiary's interest to be defeasible. Also noted in paragraph 16 of PCG 2016/16, a broad power to amend the trust instrument is an example of a power that can cause a beneficiary's interest to be defeasible. The ability to amend the Trust Deed, whether requiring unanimous approval or not, will constitute a power capable of defeating a beneficiary's interest in the income or capital of the Trust. As noted by Stone J in Colonial, it follows [from unit holders' ability to amend the Constitution] that the members could vote to terminate the present right to a share of income and capital. | Detailed Reasoning - Conclusion: As per paragraph 16 of PCG 2016/16, the Trust Deed contains clauses by which a Unitholder's interest in a share of the income or capital of the Trust may be defeased. Accordingly, the Unitholders of the Trust do not have fixed entitlements to all of the income and capital of the Trust as defined in subsection 995-1(1) of the ITAA 1997 and subsection 272-5(1) of Schedule 2F to the ITAA 1936. | Summary: The Commissioner will exercise the discretion in subsection 272-5(3) of Schedule 2F to the ITAA 1936 to treat the Unitholders of the Trust as having fixed entitlements to all of the income and capital of the Trust. | Detailed Reasoning - Detailed reasoning: Subsection 272-5(3) of Schedule 2F to the ITAA 1936 contains a discretion, whereby in cases where beneficiaries do not have a fixed entitlement, the Commissioner may treat such beneficiaries as having a fixed entitlement, having regard to the following factors in paragraph 272-5(3)(b) of Schedule 2F to the ITAA 1936: i. the circumstances in which the entitlement is capable of not vesting or the defeasance can happen; and ii. the likelihood of the entitlement not vesting or the defeasance happening; and iii. the nature of the trust. Because the answer to Question 1 is no, and the Unitholders of the Trust do not have a vested and indefeasible interest pursuant to subsection 272-5(1) of Schedule 2F to the ITAA 1936, the discretion in subsection 272-5(3) of Schedule 2F to the ITAA 1936 needs to be considered. The circumstances in which defeasance can happen have been outlined above in Question 1. In considering the likelihood of the defeasance happening, paragraph 31 of PCG 2016/16 states that where the likelihood of the defeasance occurring is low, this will weigh towards a favourable exercise of the discretion. Paragraphs 32 and 33 of PCG 2016/16 provide that any preconditions or caveats that affect the likelihood of defeasance and how often, if at all, the Trustee has exercised a power to defeat a beneficiary's interest are also relevant. In considering the nature of the trust under subparagraph 272-5(3)(b)(iii) of Schedule 2F to the ITAA 1936, paragraph 34 of PCG 2016/16 provides that it is the basic legal characteristics and economic function of the trust, both actual and intended, that are being referenced. Paragraph 34 of PCG 2016/16 provides the following circumstances where the nature of the trust may limit a trustee's ability to affect the interests of beneficiaries: a. additional responsibilities are placed on the trustee by legislation; b. contractual restrictions limit the trust manager's access to trust assets; c. the trust is subject to industry regulations, licensing or registration requirements which are legally enforceable; d. commitments are made in a PDS; e. the trust deed restricts the ability of the trustee to issue and redeem units at anything other than market value or other values approximating net asset value, or f. the unanimous (100%) approval of the beneficiaries is required prior to the exercise of a power capable of defeating a beneficiary's interest by the trustee or manager. Other matters in PCG 2016/16 Paragraph 55 of PCG 2016/16 provides a list of factors that the Commissioner considers to be favourable when deciding whether to exercise the discretion. Paragraph 56 of PCG 2016/16 provides a list of factors that the Commissioner considers to be unfavourable when deciding whether the exercise the discretion. PCG 2016/6 also provides a safe harbour in paragraph 54. Paragraph 54(6) provides the following: | Detailed Reasoning - (6) Other trusts: The trust complies with all of the following conditions: • the trust must have a trust instrument; • all beneficial interests in the income and capital of the trust are vested; • all beneficial interests have the same right to receive the income and capital of the trust; • all beneficial interests in the income and capital of the trust can be expressed as a percentage of the total income and capital of the trust; • the trust is not a discretionary trust or a trust with default income or capital beneficiaries - that is, no beneficial interest in the income or capital of the trust is capable of being defeated, partly or wholly, by the exercise of a power of appointment of income or capital by the trustee or other donee; • a trustee or manager has never exercised a power capable of defeating a beneficiary's interest to defeat a beneficiary's interest in the income or capital of the trust; and • an arrangement has not been entered into which would result in: (a) section 272-35 having application (b) the trafficking of the tax benefit of a tax loss, bad debt deduction or debt/equity swap deduction, or (c) fraud or evasion. The Commissioner considers that the Trust satisfies the conditions set out in paragraph 54(6) of PCG 2016/6. | Detailed Reasoning - Conclusion: Having regard to the factors in paragraph 272-5(3)(b) of Schedule 2F to the ITAA 1936, the Commissioner considers that the Unitholders of the Trust should be treated as having a fixed entitlement to a share of the income and capital of the Trust. The Commissioner will exercise the discretion in subsection 272-5(3) of Schedule 2F to the ITAA 1936. | Summary: The losses made by the Trust for the income years ended 30 June 20XX to 30 June 20XX will be transferred at the joining time from the Trust to A Co pursuant to section 707-120 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subdivision 707-A Subdivision 707-A of the ITAA 1997 outlines the rules in which an entity becoming a member of a consolidated group ('the joining entity') can transfer a loss to the head company of the group. As outlined in section 707-115 of the ITAA 1997, subdivision 707-A of the ITAA 1997 applies to the following: This Subdivision applies to a loss of any sort if: (a) an entity (the joining entity ) becomes a member of a consolidated group (the joined group ) at a time (the joining time ) in an income year (the joining year ); and (b) the loss was made by the joining entity for an income year ending before the joining time. Accordingly, subdivision 707-A of the ITAA 1997 will apply to the tax losses made by the Trust in the income years ended 30 June 2017 to 30 June 2024 because: a. the Trust, being the joining entity, will become a member of a consolidated group on the Completion Day, being the joining time, in the income year ending 30 June 2026, being the joining year; and b. the tax losses were made by the Trust in income years ending before the joining time. Section 707-120 of the ITAA 1997 provides the following: (1) Subject to subsection (1A), the loss is transferred at the joining time from the joining entity to the head company of the joined group (even if they are the same entity). (1A) The loss is transferred under subsection (1) only to the extent (if any) that the loss could have been utilised by the joining entity for an income year consisting of the trial year if: (a) at the joining time, the joining entity had not become a member of the joined group (but had been a wholly owned subsidiary of the head company if the joining entity is not the head company); and (b) the amount of the loss that could be utilised for the trial year were not limited by the joining entity's income or gains for the trial year. Pursuant to subsection 707-120(2) of the ITAA 1997, the trial year will start 12 months before the joining time and end just after the joining time. The joining time will be the Completion Day. In considering the requirements of subsection 707-120(1A) of the ITAA 1997, it is necessary to consider the trust loss provisions in Schedule 2F to the ITAA 1936. Trust loss provisions As a consequence of the conclusion to Question 2, the Trust is a fixed trust. Accordingly, section 266-25 of Schedule 2F to the ITAA 1936 is relevant in determining the losses that can be utilised. The test period for the purposes of section 266-25 of Schedule 2F to the ITAA 1936 for each tax loss of the Trust is the period from the beginning of the income year in which the tax loss was incurred until just after the Completion Day. Considering the conditions in subsection 266-25(1) of Schedule 2F to the ITAA 1936: a. the Trust would be able to deduct its tax losses it made from 1 July 2016 to 30 June 2024 if the assumption in paragraph 707-120(1A)(b) of the ITAA 1997 b. as a consequence of the conclusion to Question 2, the Trust was a fixed trust at all times in the Test Period; c. the Trust was not a widely held unit trust at all times in the Test Period; and d. the Trust was not an excepted trust at all times in the Test Period. Section 266-25 of Schedule 2F to the ITAA 1936 will therefore apply to the Trust. It is therefore necessary to consider whether the Trust meets the conditions in section 266-40 or 266-45 of Schedule 2F to the ITAA 1936. Section 266-40 and the 50% stake test Section 266-40 of Schedule 2F to the ITAA 1936 provides the following: The fixed trust must pass the 50% stake test for the test period. To find out whether the trust passes the 50% stake test for the period: see Subdivision 269-C. Sections 269-50 and 269-55 in Subdivision 269-C of Schedule 2F to the ITAA 1936 provide the following: Section 269-50 More than a 50% stake in income (1) If there are individuals who have (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of a trust, those individuals have more than a 50% stake in the income of the trust. More than a 50% stake in capital (2) If there are individuals who have (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the trust, those individuals have more than a 50% stake in the capital of the trust. Section 269-55 Passing the 50% stake test (1) If, at all times during a period, or at 2 times: (a) the same individuals have more than a 50% stake in the income of a trust; and (b) the same individuals (who may be different from those in paragraph (a)) have more than a 50% stake in the capital of the trust; the trust passes the 50% stake test for the period or in respect of the 2 times. (2) If a trust is a widely held unit trust it is taken to pass the 50% stake test for a period or in respect of 2 times if it is reasonable to assume that the requirements of paragraphs (1)(a) and (b) are satisfied in respect of the period or the 2 times. Relevantly, section 272-30 of Schedule 2F to the ITAA 1936 provides the following: Coverage of section (1) This section also affects references in this Schedule (other than in subparagraph 269-75(b)(ii) and section 272-25) to a person or individual having, directly or indirectly, a fixed entitlement to a share of the income or capital of a company, partnership or trust (the main entity) at a particular time (the test time). Note: This section will not affect a reference to a person or individual having a fixed entitlement where the phrase "directly or indirectly" is not used. Interposed family trusts (2) If at the test time a family trust has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity, it is treated as if it had the fixed entitlement as an individual and for the individual's own benefit. ... Pursuant to section 272-140 of Schedule 2F to the ITAA 1936, family trust has the meaning given by section 272-75 of Schedule 2F to the ITAA 1936. Section 272-75 of Schedule 2F to the ITAA 1936 provides that a trust is a family trust at any time when a family trust election in respect of the trust is in force. The Test Period - establishment of the Trust until just before the Completion Day Since the Trust was established, the XXXX Trust and the XXXX Trust have together directly held more than 50% of the Units. Accordingly, and as a consequence of the conclusion to Question 2, from XXXX until just before the Completion Day, the XXXX Trust and the XXXX Trust will together directly hold fixed entitlements to more than 50% of the income and capital of the Trust. As both the XXXX Trust and the XXXX Trust have family trust elections in force, both trusts will be family trusts pursuant to section 272-75 of Schedule 2F to the ITAA 1936. Accordingly, subsection 272-30(2) of Schedule 2F to the ITAA 1936 will apply such that the XXXX Trust and the XXXX Trust are treated as though they have fixed entitlements to income and capital of the Trust as individuals and for the individual's own benefit. In considering the 50% stake test in Subdivision 269-C of Schedule 2F to the ITAA 1936, there will be individuals who have more than a 50% stake in the income and capital of the Trust directly. The Test Period - on and just after the Completion Day Section 272-10 of Schedule 2F to the ITAA 1936 provides the following: Fixed entitlement to share of income or capital of a company (1) If a shareholder in a company holds shares carrying the right to receive some or all of the dividends that may be paid by the company, the shareholder has a fixed entitlement to a share of the income of the company equal to the percentage of the total dividends represented by the dividends that the shareholder has a right to receive. (2) If a shareholder in a company holds shares carrying the right to receive the whole or part of any distribution of the paid - up share capital of the company in the event of any return of capital to shareholders, the shareholder has a fixed entitlement to a share of the capital of the company equal to the percentage of the total distribution represented by the amount that the shareholder has a right to receive. Section 272-20 of Schedule 2F to the ITAA 1936 provides the following: A person holds a fixed entitlement to a share of the income or capital of a company, partnership or trust indirectly if the person holds the entitlement indirectly through fixed entitlements to shares of the income or capital, respectively, of interposed companies, partnerships or trusts. At the Completion Time, the Unitholders, will transfer their Units to A Co and be issued Shares in A Co of a whole number and in the same percentage as the Units that they previously owned in the Trust. Accordingly, the XXXX Trust and the XXXX Trust will hold more than 50% of the Shares in A Co between them. The Shares will carry an equal right to receive dividends that may be paid by A Co and will carry an equal right to receive distributions of paid-up share capital of A Co in the event of any return of capital from A Co to its shareholders. In exchange, A Co will hold 100% of the Units from the Completion Time onwards. As a consequence of the conclusion to Question 2, A Co will have fixed entitlements to 100% of the income and capital of the Trust. In relation to the Shares issued by A Co, pursuant to section 272-10 of Schedule 2F to the ITAA 1936, the shareholders of A Co will have a fixed entitlement to a share of the income and capital of A Co equal to the percentage of shares they hold in A Co. Because the shareholders of A Co will have a fixed entitlement to a share of the income and capital of A Co, pursuant to section 272-20 of Schedule 2F to the ITAA 1936, the shareholders of A Co will hold a fixed entitlement in the income and capital of the Trust indirectly. As the XXXX Trust and the XXXX Trust will hold more than 50% of the Shares in A Co between them, together, the XXXX Trust and the XXXX Trust will hold more than a 50% share of the income and capital of the Trust indirectly from the Completion Time onwards. In considering section 269-50, pursuant to section 272-30 of Schedule 2F to the ITAA 1936, the XXXX Trust and the XXXX Trust will be treated as if it had the fixed entitlement as an individual and for the individual's own benefit. Accordingly, on and just after the Completion Day, there will be individuals, being the XXXX Trust and the XXXX Trust, who have between them fixed entitlements to a greater than 50% share of the income and capital of the Trust indirectly. | Detailed Reasoning - Conclusion: The Trust will therefore pass the 50% stake test as set out in section 269-55 of Schedule 2F to the ITAA 1936 and would have been able to utilise the tax losses it made from the income years ended 30 June 20XX to 30 June 20XX during the trial year identified in section 707-120 of the ITAA 1997. Accordingly, the losses made by the Trust for the income years ended 30 June 20XX to 30 June 20XX will be transferred at the joining time from the Trust to A Co pursuant to section 707-120 of the ITAA 1997.

Does Part 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 .