Private ruling: Commissioner's discretion - fixed interests
Date of advice: 22 August 2025
Published: 27 October 2025
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 January 20XX

Ruling: Q1: Do the Unitholders of the Trust have fixed entitlements to 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: Do the Unitholders of the Trust have a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding for the purposes of former subsection 160APHL(11) of the ITAA 1936? | A2: No | Q3: If the answer to Question 1 is no, will the Commissioner exercise his discretion in accordance with subsection 272-5(3) of Schedule 2F to the ITAA 1936 to deem the Unitholders of the Trust as having fixed entitlements to all of the income and capital of the Trust? | A3: Yes | Q4: If the answer to Question 2 is no, will the Commissioner exercise his discretion in accordance with 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 their unitholding? | A4: Yes

Relevant facts and circumstances: The Trust is a unit trust and an Australian resident trust estate settled by a trust deed dated 9 January 20XX (the Deed). The Trustee) is an Australian private company incorporated on 6 December 20XX and the trustee of the Trust. The Trust Fund is initially divided into XX fully paid Units, which are wholly owned by one individual. Since the establishment of the Trust, no additional units have been issued, and no units have been redeemed. Activities of the Trust The Trust is intended to be used as an asset investment vehicle for the purchase and holding of listed shares and units, which it will derive dividends and other distributions from. The listed shares and units will be held for a long period of time, and not acquired and disposed in shorts periods (i.e. share trading). The Trust Deed The relevant clauses contained in the Trust Deed are summarised below: Clause X - The Trust is established as a Fixed Trust and is not a discretionary trust or a trust with default income or capital beneficiaries. Clause X.X - The beneficiaries (being the Unitholders) of the Trust are presently entitled to the income and capital of the Trust, subject only to the payment of proper expenses by and of the Trustee relating to the administration of the Trust. Clause X.X - The requirements of clause 1.1 cannot be varied, removed, restricted or otherwise affected by the exercise of any discretion, or failure to exercise any discretion, conferred on a person by the Deed. Clause X.X - The Trust must only have one class of Units issued. Additionally, the proportion of entitlement to Trust capital which a Unitholder is entitled to on winding up or surrender of the Units must be fixed and be the same as the proportion of income of the Trust to which the Unitholder is entitled. Clause X.X - To the extent that any provision of the Deed is inconsistent with the Trust being a Fixed Trust (including provisions that confer a discretion on the Trustee), the provision shall be read down to that extent accordingly. Further, if any express provision reflecting a term or condition is required to be included for this Trust to be a Fixed Trust, then to that extent, that express provision is deemed to be included in this Deed. Clause X - The Unitholders are entitled to the Trust Fund in proportion to which they hold Units in the Trust Fund from time to time. Clause X - The Trustee may, with the approval of a Unanimous Resolution, create or issue further Units. Unless the Unitholders by Unanimous Resolution otherwise direct: New units shall be issued only to, or in favour of, the person making an addition to the Trust Fund equal to the Fair Value of the Units proposed to be issued to that person. The Trustee may issue partly paid units. Distributions and other entitlements for partly paid units shall be proportional to the extent the unit is paid up unless a Unanimous Resolution determines otherwise. Clause XX.X - The Trustee will redeem Units at Fair Value at the request of a Unitholder or on the authority of a Unanimous Resolution. Clause XX - Subject to clause X, the Trustee may determine receipts to be treated as capital or income. Clause XX - The Trustee shall pay, apply or set aside the Income in the proportion in which the Unitholder holds Units on the last day of the accounting period. Clause XX - Subject to clause X and XX.X, and with the authority of a Unanimous Resolution, the Trustee, at any time before the Vesting Day, may distribute the whole or any part of the Trust property or the net proceeds of the Trust Property to Unitholder in proportion to the units they hold at the date of distribution. Clause XX.X - Subject to clause XX.X, the Trustee may, by a Special Resolution, vary this Deed (on a retrospective or prospective basis) provided the variation does not adversely affect the vested interests of any Unitholder who did not or may not approve the vote for variation. Clause XX.X - Subject to clause XX.X, where the Trustee cannot vary the Deed under clause XX.X (i.e. the variation will adversely affect the vested interest of any Unitholder), the Trustee may, by a Unanimous Resolution, vary this Deed (on a retrospective or prospective basis). Clause XX.X - If any variation purports to have the effect of changing the status of the Trust from a Fixed Trust to a non-Fixed Trust and/or altering or deleting clause X, such an amendment is invalid to that extent, and this clause and restriction itself cannot be varied. Clause XX.X - Fair Value in relation to any Unit means the price determined on the basis of the net asset value, according to the Australian accounting principles, of the Trust Fund divided by the number of issued Units at the relevant time. Clause XX.X - Fixed Trust means a trust that satisfies the relevant criteria to be recognised as a fixed trust for the purposes of 3A(3B) of the Land Tax Management Act 1956 (NSW) or such other requirements that the Land Tax Management Act 1956 (NSW) requires from time to time Status of the Trust for the year ended 30 June 2025 The Trustee of the Trust self-assessed the Trust as a fixed trust under the safe harbour rule for the income year XX in accordance with paragraph 52 of PCG 2016/16.

Relevant legislative provisions: Income Tax Assessment Act 1936 f ormer section 160APHL | Income Tax Assessment Act 1936 former subsection 160APHL(11) | Income Tax Assessment Act 1936 former subsection 160APHL(13) | Income Tax Assessment Act 1936 former subsection 160APHL(14) | Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(1) | Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(2) | Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(3) | Income Tax Assessment Act 1936 Schedule 2F section 272-65 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Detailed Reasoning - Question 1: Do the Unitholders of the Trust have fixed entitlements to 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)? | 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 ITAA 1936) because the Trust Deed contains several clauses, which cause beneficiary's interests to be defeasible. | Detailed Reasoning - Detailed reasoning: The term 'fixed trust' is defined in subsection 995-1(1) of the ITAA 1997 and section 272-65 of Schedule 2F to the ITAA 1936 to mean a trust in which entities or persons (respectively): ... have fixed entitlements to all of the income and capital of the trust. The definition of the term '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 Income Tax Assessment Act 1936 .' Subsection 272-5(1) of Schedule 2F to the ITAA 1936 defines a 'fixed entitlement' in a trust: If, under a trust instrument, a beneficiary has a vested and indefeasible interest in a share of income of the trust that the trust derives from time to time, or of the capital of the trust, the beneficiary has a fixed entitlement to that share of the income or capital. In addition, subsection 272-5(2) states that: 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 Unitholder, in the income or capital of the unit trust is defeasible. Practical Compliance Guidelines PCG 2016/16 (PCG2016/16) outlines the factors the Commissioner will consider when deciding whether to exercise the discretion to treat an interest in the income or capital of a trust as being entitlement. These factors are contained in subsection 272-5(3) of the Schedule 2F to ITAA1936. PCG2016/3 also outlines a safe harbour compliance approach for trustees of certain trusts that allows them to manage the trust's tax affairs as if the Commissioner had exercised the discretion to treat beneficiaries as having fixed entitlements to income and capital of the trust. The concept of a 'fixed entitlement' is used to determine whether a trust is a fixed trust, whether a trust's beneficiaries have maintained the requisite proportion of ownership, and for tracing direct and indirect entitlements. A beneficiary will have a fixed entitlement to a share of the income or capital of the trust if, under a trust instrument, their interest in the income or capital is vested and indefeasible. | Detailed Reasoning - Do beneficiaries have a vested interest in all of the income and capital of the trust under the trust instrument?: For these purposes, the Commissioner accepts that a 'trust instrument' includes a deed or constitution. The beneficiaries of a trust that does not have a 'trust instrument' are not capable of having fixed entitlements in the absence of the exercise of the Commissioner's discretion. Trustees of such trusts cannot rely on the safe harbour compliance approach in managing the trust's tax affairs. An interest is 'vested' if the interest is vested in interest or vested in possession. An interest is vested in possession when it gives its holder a right of present enjoyment, whereas an interest is vested in interest if it gives its holder a present right to future enjoyment. Application to your circumstances Clause XX.X states 'the Trustee may accept any property into the Trust Fund even though, due to the nature of the property or under the terms by which the property is received, the property must vest in a Unitholder within a certain period prior to the Vesting Day. However, the Trustee is obliged to keep records and take such action as is necessary to ensure that the property does in fact vest in a Unitholder'. Clauses XX.X and XX.X of the Trust Deed allow the Trustee to vary the Trust Deed, however the variation of the Deed is limited to application of clause XX which states as follows: XX.X If any variation purports to have the effect of changing the status of the Trust from a Fixed Trust to a non-Fixed Trust and/or altering or deleting clause 1, such an amendment is invalid to that extent, and this clause and restriction itself cannot be varied. Moreover, the variation does not adversely affect the vested interests of any Unitholder who did not or may not approve or vote for the variation. As a result, the Commissioner accepts that the interests of Unitholders of the Trust are vested | Detailed Reasoning - Do beneficiaries have an indefeasible interest in all of the income and capital of the trust under the trust instrument?: 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. An example of a defeasible interest is an interest of a default beneficiary in the income or capital of the trust. As per paragraph 16 of the PCG 2016/6, beneficiary's interests can be defeasible because of the following powers included in the trust deeds: • Broad powers to amend the trust instrument. • Powers to issue new units after the trust is settled, or to redeem existing units. • A power to reclassify existing units so that they do not all have equal rights to receive the income and capital of the trust. • A power to classify receipts as being on income or capital account where the units that have been issued do not all have the same rights to receive the income and capital of the trust. • A power to appoint a beneficiary's interest in the income or capital of the trust to another beneficiary. • A power to settle or appoint any part of the corpus of the trust to a new trust with different beneficiaries. • 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. Moreover, the Commissioner will disregard the following factors which may otherwise result in a different conclusion: • fees or charges imposed by the trustee in relation to the beneficial interests • issue price and redemption price of the beneficial interests (provided that the savings rule in subsection 272-5(2) is satisfied as explained below), and • exposure of the beneficial interests to foreign exchange gains and losses. Application to your circumstances It is accepted that the Trust Deed provides Unitholders with a vested interest in the income and capital of the Trust. Nevertheless, the Trust Deed contains several clauses, which cause beneficiary's interests to be defeasible. The clauses are as follows: • Issuing of new Units According to the Clause X of the provided Deed, the Trustee may create and issue further Units with the approval of a Unanimous Resolution at an issue price and to such Persons as determined by the Trustee. As per Clause X.X To the extent that any provision of this Deed is inconsistent with the Trust being a Fixed Trust (including provisions that confer a discretion on the Trustee), the provision shall be read down to that extent accordingly. Further, if any express provision reflecting a term or condition is required to be included for this Trust to be a Fixed Trust, then to that extent, that express provision is deemed to be included in this Deed. Nevertheless, Clause XX.X defines 'Fixed Trust' as a trust that satisfies the relevant criteria to be recognised as a fixed trust for the purposes of 3A(3B) of the Land Tax Management Act 1956 (NSW) or such other requirements that the Land Tax Management Act 1956 (NSW) requires from time to time. Therefore, Clause X.X limits application of the provisions of the Deed that are inconsistent with the Trust being a Fixed Trust only in relation to the Fixed Trust status of the Trust only under the Land Tax Management Act 1956 (NSW) . As a result, potential future Unanimous Resolutions made by Unitholders that result in the creation and issuing of further units may potentially not breach Clause X.X but may affect the fixed trust status of the Trust under income tax provisions. In other words, Clause X.X of the Deed does not prevent the Trust from becoming a non-fixed trust under income tax provisions. • Redemption of Units Clause X.X of the provided Deed allows to redeem the units at request of a Unit Holder or on the authority of a Unanimous Resolution. Similarly to the explanation provided regarding the issuing of new Units, possible future Unanimous Resolutions made by Unitholders that result in the redemption of units may not potentially breach Clause X.X but may affect the fixed trust status of the Trust under income tax provisions. • Variation of the Trust Deed Subject to clause XX.X, the Trustee may, by deed or written resolution which is authorised by or is to be ratified by a Special Resolution vary this Deed (on a retrospective or prospective basis) provided the variation does not adversely affect the vested interests of any Unitholder who did not or may not approve or vote for the variation Subject to clause XX.X, the Trustee may, by deed or written resolution which is authorised by or is to be ratified by a Unanimous Resolution vary this Deed (on a retrospective or prospective basis) where the terms of such variation cannot be amended under clause XX.X If any variation purports to have the effect of changing the status of the Trust from a Fixed Trust to a non-Fixed Trust and/or altering or deleting clause X, such an amendment is invalid to that extent, and this clause and restriction itself cannot be varied. As the definition of a Fixed Trust limits the possible variations of the Trust Deed only to variations that change the fixed trust status of the Trust under the Land Tax Management Act 1956 (NSW) , potential variations of the Trust Deed that possibly may affect the fixed trust status of the Trust under income tax provisions do not breach the Trust Deed and may be valid. As a result, the Trustee may amend the Trust Deed to make the Unitholders' entitlements defeasible, which results in changing the status of the Trust to non-fixed in accordance with income tax provisions. This view is confirmed to some extent by examples 1 and 3 contained in PCG 2016/6 and presented below: | Detailed Reasoning - Example 1: savings rule applies: 43. The interests in the income and capital of a trust are defeasible only because the trustee may issue or redeem units for a price determined on the basis of the net asset value of the trust. The savings rule will apply in this circumstance to ensure that the beneficiaries' interests are not defeasible, and are fixed entitlements. | Detailed Reasoning - Example 3: savings rule and a safe harbour apply: 45. If, in relation to the trust in Example 1, the trustee also had an unlimited power to amend the trust deed, the beneficiaries' interests would be defeasible and would not constitute fixed entitlements. However, if the requirements of one of the safe harbours in the compliance approach in Attachment B are satisfied, the trustee can manage the trust's tax affairs as if the Commissioner has exercised the discretion to treat the beneficiaries as having fixed entitlements to the income and capital of the trust. | Detailed Reasoning - Question 2: Do the Unitholders of the Trust have a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding for the purposes of former subsection 160APHL(11) of the ITAA 1936? | Summary: No. The Unitholders do not have a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding, as required by former subsection 160APHL(11) of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: Former subsection 160APHL(11) of the ITAA1936 states that for the purposes of subsection 16APHL(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. Relevantly, in Dwight v Commissioner of Taxation 92 ATC 4192, Hill J provided at [4202-4203]: Estates may be vested in interest or vested in possession, the difference being between a present fixed right of future enjoyment where the estate is said to be vested in interest and a present right of present enjoyment of the right, where the estate is said to be vested in possession: Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 at 496 per Griffith CJ, at 501 per Isaacs J. A person with an interest in remainder, subject to a pre-existing life interest, has an interest which is vested in interest, but being a future interest is not yet vested in possession. That person's interest will vest in possession on the death of the life tenant. In the present context the word 'vested' is used in contradistinction to contingent. An interest is said to be defeasible where it can be brought to an end and indefeasible where it cannot. Thus, a beneficiary with an interest which is not contingent but which interest may be brought to an end by the exercise of a power of appointment, would be said to have a vested but defeasible interest ... The Trust Deed contains a number of clauses where the vested interest of the Unit Holders in the corpus of the Trust can be defeasible including clauses that allow to: • Issuing of new Units • Redemption of Units • Variation of the Trust Deed As a result, the Unitholders do not have an indefeasible interest in the corpus of the Trust. | Detailed Reasoning - Conclusion: The Unitholders do not have a vested and indefeasible interest in so much of the corpus of the Trust as is comprised by the trust holding, as required by former subsection 160APHL(11) of the ITAA 1936.The Trustee can issue new units, redeem the existing units and vary the Trust Deed. Clause X.X of the Deed does not prevent the Trust from becoming a non-fixed trust under income tax provisions. | Detailed Reasoning - Question 3: If the answer to Question 1 is no, will the Commissioner exercise his discretion in accordance with subsection 272-5(3) of Schedule 2F to the ITAA 1936 to deem the Unitholders of the Trust as having fixed entitlements to all of the income and capital of the Trust? | Summary: Having regard to the relevant factors in paragraph 272-5(3)(b) of Schedule 2F the ITAA 1936, the Commissioner exercises his discretion 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: A fixed trust may both rely on the savings rule in relation to some trustee powers (the power to issue or redeemunits) and request that the Commissioner exercise the discretion in the context of other powers that may defeat a beneficiary's interest (such as in relation to power to amend). Do beneficiaries have an indefeasible interest in all of the income and capital of the trust under the trust instrument after applying the savings rule? The 'savings rule' in subsection 272-5(2) of Schedule 2F to the ITAA 1936 provides that the mere fact that a trustee has power to redeem units in a unit trust, or issue further units for the following value does not mean that Unit Holders' interests in the corpus of the unit trust are defeasible: • where the units are listed for quotation in the official list of an approved stock exchange - the same price as other units are offered for sale on that exchange at the time of the redemption or issue, or • where the units are not so listed - a price determined on the basis of the net asset value of the unit trust at the time of the redemption or issue according to Australian accounting principles. For the cases, where the units are not listed, the mere fact the trustee has power to redeem units in a unit trust, or issue further units, for an appropriate value being a price determined on the basis of the net value of the unit trust at the time of the redemption or issue according to Australian accounting principles does not mean that unitholders' interests in the income or capital of the unit trust are defeasible. As per paragraph 19 of the PCG 2016/6, the Commissioner considers that the savings rule is satisfied where further units may be issued, or existing units redeemed in any of the following situations: • for a price based on a market value of the assets and liabilities of the trust which has been determined by a licensed valuer • for a price based on a market value of the assets and liabilities of the trust which has not been determined by a licensed valuer, but which nevertheless is accurate • for a price determined by reference to a value of the trust which is sufficiently close to its net asset value (allowing an adjustment for transaction costs) • for a price determined by reference to a value of the trust which is sufficiently close to its net asset value (allowing an adjustment for transaction costs), including where accrued distributions are excluded from the net asset value based on a 'unit day's pricing model' • for a price based on the volume weighted average price (VWAP) of the units, or • in accordance with ASIC Corporations (Managed investment product consideration) Instrument 2015/847, ASIC Class Order [CO 13/655] and ASIC Class Order [CO 13/657] (if relevant), or any other ASIC guidance or relief on the same subject. Market value The ATO publication, Market valuation for taxation purposes assists advisers in understanding the Commissioner's general expectations on market valuation for tax purposes. The guide includes information on what market value means for tax purposes and the evidence and processes we generally expect to see to support a valuation. The definition of 'market value' in subsection 995-1(1) of the ITAA 1997 does not provide a meaning to be applied in all contexts. Unless market value is specially defined or qualified in a particular provision, it has an ordinary meaning for which the principles in case law and the International Valuation Standards Council (IVSC) are principally relevant. According to case law, the following principles were identified to be followed in determining the ordinary meaning of market value: In valuing an asset, a valuer is to assume a market with hypothetical buyers and sellers and the 'market value', being the price negotiated between the buyer and seller to achieve a notional sale in the hypothetical market. The notional sale is assumed to be made after voluntary bargaining between a willing but not anxious seller and purchaser rather than a forced sale and with both being fully informed about the advantages and disadvantages of the asset being valued and aware of the current market conditions . The IVSC defines market value as: the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. The Commissioner considers that the savings rule is satisfied where further units may be issued, or existing units redeemed in a way consistent with the definition provided by the IVSC and the judicial definition. Application to your circumstances Clause X.X of the Trust Deed states that new units shall be issued only to, or in favour of, the person making an addition to the Trust Fund equal to the Fair Value of the Units proposed to be issued to that person. Moreover, in accordance with Clause XX.X, the Trustee will redeem Units at Fair Value at the request of a Unitholder or on the authority of a Unanimous Resolution. As per Clause XX.X, Fair Value in relation to any Unit means the price determined on the basis of the net asset value, according to the Australian accounting principles, of the Trust Fund divided by the number of issued Units at the relevant time. As a result, because the units in the Trust can be issued or redeemed only for a price determined by reference to net asset value, as defined in Clause XX.X of the Trust Deed, the savings rule can be applied. Accordingly, the Unit Holders of the Trust can rely on savings rule in relation to the trustee power regarding issuing or redeeming units. Commissioner's discretion 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, for the purposes of the Act, treat such beneficiaries as having a fixed entitlement where it is reasonable to do so based upon the factors prescribed in paragraph 272-5(3)(b). Paragraph 272-5(3)(b) of Schedule 2F to the ITAA 1936 stipulates that the Commissioner may treat a beneficiary as having a fixed entitlement (in cases where in fact beneficiaries do not have a fixed entitlement). In broad terms, there are four key matters that the Commissioner takes into account in deciding whether to exercise the discretion: • the circumstances in which a beneficiary's interest is capable of being defeated or not vesting. • the likelihood of the interest being defeated or not vesting; • the nature of the trust; and • whether the exercise of the discretion would enable a taxpayer to obtain a tax benefit from a trust with a tax loss in circumstances where the economic loss incurred was not borne by the taxpayer. Paragraph 55 of PCG 2016/16 outlines factors favourable to the exercise of the Commissioner's discretion: The Commissioner regards the following factors favourably when deciding whether to exercise the discretion: • 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 • commitments are made in Unitholder agreements, Product Disclosure Statements or other documents with legal consequences that the trustee or manager will not exercise a power capable of defeating a beneficiary's interest at all, or in a way that is adverse to the rights of beneficiaries to receive the income and capital of the trust • all beneficiaries have the same rights to receive the income and capital of the trust • the trust instrument can only be amended with the unanimous (100%) approval of all the beneficiaries • although the trust instrument can be amended without the unanimous approval of beneficiaries, the approval percentage calculated on the current interest or unit holdings of beneficiaries effectively means that all beneficiaries must approve any amendment (for example, where the approval of 75% of Unitholders is required to make the amendment and the smallest unit holding is more than 25% of the units) • the trust instrument has been amended in accordance with section 601GC of the Corporations Act 2001 (so as to assist with the efficient administration of the trust) but no beneficial interests in the income and capital of the trust are adversely affected • the beneficiaries whose rights to receive the income and capital of the trust have been adversely affected by the exercise of a power capable of defeating a beneficiary's interest have explicitly consented to that specific act (such as upon the redemption of the interests of an employee not covered by the savings rule upon the cessation of employment) • the trustee or manager deals with the beneficiaries of the trust on an arm's length basis • the trust is governed by a foreign law that is similar to Chapter 5C of the Corporations Act 2001 , and • the trust would satisfy the basic and specific conditions (as applicable to the type of trust) for access to a safe harbour. Factors adverse to the exercise of the Commissioner's discretion are listed in paragraph 56 of PCG 2016/16 and include: The Commissioner regards the following factors unfavourably when deciding whether to exercise the discretion: • a trustee or manager exercises a power to defeat beneficiaries' interests in the income or capital of the trust, however: o the nature of the power that is exercised will be important, for example, compulsorily redeeming units where a Unitholder's stake is less than a minimum specified in the trust instrument, and the Unitholder receives the redemption price of those units, is unlikely to preclude the exercise of the discretion o where external factors (such as those in the Global Financial Crisis) temporarily affect the ability of the trustee or manager to fund distributions or redemptions, this is unlikely to preclude the exercise of the discretion (for example, a temporary wholesale freezing or deferral of interests) • there are significantly different beneficiaries of the trust in an income year for which an entity seeks to have a fixed entitlement, than the beneficiaries of the trust in the income year(s) in which the trust made a tax loss, or incurred a bad debt deduction or debt/equity swap deduction • an arrangement has 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. Losses The concept of a 'fixed entitlement' was originally introduced in the context of the trust loss measures and should primarily be interpreted in that context (in the absence of any express provision or explanatory guidance that indicates a different context is relevant). The trust loss measures are an important integrity measure, removing a structural flaw in the tax system. The concept of a 'fixed entitlement' is fundamental to the structure and effectiveness of the trust loss measures. The EM to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 states (at paragraph 13.13) in respect of the Commissioner's power in subsection 272-5(3) of Schedule 2F to the ITAA 1936 that: This provision is intended to provide for special circumstances where there is a low likelihood of a beneficiary's vested interest being taken away or defeated and, having regard to the scheme of the trusts loss provisions to prevent the transfer of the tax benefit of losses and other deductions incurred by trusts, it would be unreasonable to treat the beneficiary's interest as not constituting a fixed entitlement. This indicates that when looking at the facts of a case, in the context of the criteria listed in subsection 272-5(3) of Schedule 2F to the ITAA 1936, unless the context of the provision for which fixed entitlement is required provides otherwise, the Commissioner should always have regard to whether the absence of a fixed entitlement, in these circumstances, could result in the trafficking (or transfer) of the tax benefit of any tax losses. Paragraph 272-5(3)(a) of Schedule 2F to the ITAA 1936 The current Trust Deed provide the Unitholders with vested interests in a share of the income that the Trust derives from time to time and a share of the capital of the Trust. The current Unitholder of the Trust does not, however, have a fixed entitlement to the share of income and capital in the Trust. As a result, paragraph 272-5(3)(a) of Schedule 2F to the ITAA 1936 is satisfied. Subparagraph 272-5(3)(b)(i) of Schedule 2F to the ITAA 1936: When examining the circumstancesin which a beneficiary's interest is capable of not vesting or being defeated, the Commissioner will have regard to any factor that may affect the defeasance of any beneficiary's interest, including: • the number of circumstances of potential defeasance, and • the significance of those circumstances. This includes having regard to: • any person who is capable of altering the beneficiary's interest • the nature of their relationship to the beneficiary, and • any limitation on their capability to so alter that interest. In relation to the circumstances in which the entitlement is capable of not vesting or the defeasance happening, the following factors are relevant: • Issue of units: During the Ruling period, only one class of unit has been or will be issued and the units have been or will only be issued for a price determined on the basis of the Net Asset Value (according to Australian accounting principles). As such the saving rule in paragraph 272-5(2)(d) would be satisfied. • Redemption of units: The Trustee may redeem units at request of a Unit Holder. The redemption price has been or will be determined on the basis of the Net Asset Value (according to Australian accounting principles. As such, the saving rule in paragraph 272-5(2)(d) of Schedule 2F to the ITAA 1936 would be satisfied. • Amendment of the Trust Deed: No amendments have been made to the Trust Deed and no amendments are planned prior to the end of the ruling period. The Commissioner accepts that the assumptions mitigate the circumstances in which the beneficiaries' interests in the income and capital of the Trust can be defeated. Subparagraph 272-5(3)(b)(ii) of Schedule 2F to the ITAA 1936 When considering the likelihood of the interest not vesting or being defeated, the Commissioner must form a view as to the probability that the contingency or defeasance will happen. Where the likelihood of the contingency happening is high or the action or event of defeasance occurring is low, this will weigh towards a favourable exercise of the discretion. Where the trustee or manager of the trust has a particular power to defeat a beneficiary's interest, it is relevant to consider how often, if at all, they have exercised that power over a relevant period. Any preconditions or caveats that affect the likelihood of a beneficiary's interest not vesting or being defeated are also relevant. In relation to the likelihood of the entitlement not vesting, or the defeasance happening, the following factors are relevant: • The Trustee's behaviour from the time the Trust was settled to the date of this ruling application is relevant. It is noted that defeasible powers contained in the Trust Deed have not been exercised to defease any of the requisite interests of the Unitholders. • In respect of the Ruling period being the years ending June 2026-2029, having regard to the assumptions, the Trustee has exercised or may exercise its powers under the Trust Deed such that: o There will only be one class of units will be issued. o No units will be reclassified. The rights attached to units already in existence will not be modified. o Units will only be transferred or redeemed at the request of a Unitholder. o Units will be issued or redeemed for a price determined on a basis that satisfies the 'savings rule' in subsection 272-5(2) of Schedule 2F to the ITAA 1936 - i.e., on the basis of the Trust's net asset value, according to Australian accounting principles, at the time of the issue or redemption having regard to paragraph 19 of the PCG 2016/16. o No units will be issued or redeemed at a discount. o No partly paid units will be issued. o No streaming of income or capital will occur. o The Trustee will not seek to amend or vary the Trust Deed to defeat the interest or change the fixed entitlements of Unitholders to the income and capital of the Trust. o In the event the Trust is terminated, all Unitholders will be entitled to the income and capital of the trust in proportion to their unitholding - if requested by a Unitholder, the Trustee will transfer assets rather than pay cash in satisfaction of amounts owing, including as part of winding up the trust, to that particular Unitholder. The Trustee will only transfer to that particular Unitholder assets of the Trust to the extent that the market value of the assets is equivalent to their proportion of unitholding. The Trustee has never exercised its powers under the Deed in a way that the above assumptions would not be applicable and will not to do so for the Ruling period, to defeat a Unitholder's interest in the income or capital of the Trust. Consequently, the Commissioner would accept that the likelihood of the beneficiaries' interests in the income and capital of the Trust being defeated would be low. Subparagraph 272-5(3)(b)(iii) of Schedule 2F to the ITAA 1936 The nature of the trust refers to its basic legal characteristics and its economic function, both actual and intended. The ability of the trustee or manager of the trust to adversely affect the interests of beneficiaries could be limited where: • additional responsibilities are placed on the trustee by legislation, most commonly as a registered managed investment scheme under Chapter 5C of the Corporations Act 2001; • contractual restrictions limit the trust manager's access to trust assets; • the trust is subject to industry regulations, licensing or registration requirements, which are legally enforceable, such as the Australian Securities Exchange (ASX) Listing Rules which are enforceable against listed entities and their associates (sections 793C and 1101B of the Corporations Act 2001); • commitments are made in a product disclosure statement, investment memorandum or other document to exercise powers in a particular (restrictive and/or non-adverse) way; • 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 • 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. In relation to the nature of the trust the following factors are relevant: • The Trust is a unitised trust; however, the Units are not publicly listed on an approved stock exchange and the Trust is not a managed investment scheme. Therefore, the circumstances and likelihood in which each Unitholder's entitlement is capable of not vesting or the defeasance happening is not reduced in this Trust. • The purpose of establishing the Trust is to allow the Unit Holders to derive income/profits from the investments made by the Trust. At the date of the ruling application, the Trust has 2 related Unit Holders. • The Trustee is not required to hold an Australian Financial Services Licence in order to act as Trustee of this Trust and therefore not subject to Australian financial services regulations. • The parties are dealing on an arm's length basis. The Commissioner accepts that in these circumstances the ability of the Trustee to adversely affect the interests of beneficiaries is limited - the parties dealing on an arm's length basis. | Detailed Reasoning - Conclusion: Having regard to the relevant factors in paragraph 272-5(3)(b) of Schedule 2F the ITAA 1936, such as: • the circumstances in which the entitlement is capable of not vesting or the defeasance can happen; and • the likelihood of the entitlement not vesting or the defeasance happening; and • the nature of the trust the Commissioner exercises his discretion to treat the Unitholders of the Trust as having fixed entitlements to all the income and capital of the Trust throughout the ruling period. | Detailed Reasoning - Question 4: If the answer to Question 2 is no, will the Commissioner exercise his discretion in accordance with 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 their unitholding | Summary: Yes. Based on the facts provided, it would be reasonable for the Commissioner to consider exercising his 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. | Detailed Reasoning - Detailed reasoning: Former subsection 160APHL(14) of the ITAA 1936 contains a discretion, whereby in cases where beneficiaries do not have a vested and indefeasible interest in so much of the corpus of the trust as is comprised by the trust holding, the Commissioner may determine that the interest is to be taken to be vested and indefeasible, where it is reasonable to do so based upon the factors prescribed in former paragraph 160APHL(14)(c) of the ITAA 1936. The requirements to be satisfied in respect of the discretion are contained in former subsections 160APHL(14)(a), (b) and (c) of the ITAA 1936 and are listed below. In terms of 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: It is accepted that the taxpayer has an interest in so much of the corpus of the Trust as is comprised by the trust holding. In terms of former paragraph 160APHL(14)(b) - Apart from this subsection, the interest would not be a vested or indefeasible interest: Although a Unit Holder's interest in the capital of the Trust is vested, the Trust Deed of the Trust contains certain clauses by which a Unitholder's interest in a share of the capital of the Trust may be defeased, as discussed below. In terms of former paragraph 160APHL(14)(c) - Having regard to the factors prescribed in former paragraph 160APHL(14)(c): These factors are: (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 circumstances in which the interest is capable of not vesting or the defeasance can happen The powers contained in the Trust Deed that may defease a Unitholder's interest in the corpus of the Trust are noted. The likelihood of the interest not vesting or the defeasance happening In terms of the likelihood of the powers that may defease a Unitholder's interest in the corpus the following is noted: The Trust Deed contains a number of clauses where the vested interest of the Unit Holders in the corpus of the Trust can be defeasible including clauses that allow to: • Issuing of new Units • Redemption of Units • Variation of the Trust Deed Nature of the Trust The Trust is intended to be used as an asset investment vehicle for the purchase and holding of listed shares and units, which it will derive dividends and other distributions from. The listed shares and units will be held for a long period of time, and not acquired and disposed in shorts periods (i.e. share trading). Moreover, the Trust Deed restricts the ability of the trustee to issue or redeem units at fair value determined on the basis of the net asset value, according to the Australian principles, of the Trust Fund divided by the number of issued Units at the relevant time. Other matters The discretion in former subsection 160APHL(14) of the ITAA 1936 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 the Taxation Laws Amendment Bill (No. 2) 1999 , which accompanied the introduction of former subsection 160APHL(14) of the ITAA 1936, outlined the purpose of those 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. Other matters the Commissioner may consider relevant are found in the PCG 2016/16 in paragraphs 34 and 35. These were considered in Question 3. In exercising the discretion, the Commissioner must ensure that the purpose of the integrity measures is not undermined. The purpose of the integrity measures will not be undermined due to the inclusion of the Assumptions for the purpose of this ruling. The purpose of the integrity measures will not be undermined due to the Facts and Assumptions forming part of this Ruling. Part IVA contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit or imputation benefit in connection with an arrangement. If Part IVA applies the tax benefit or imputation benefit can be cancelled. 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. | Detailed Reasoning - 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 during the Ruling Period.

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. | 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 .