Private ruling: Commissioner's discretion
Date of advice: 12 November 2025
Published: 2 February 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the Commissioner consider it fair and reasonable to treat Trust A as holding, at each of the test times, the whole or part of its fixed entitlement to the income and capital of Trust B as an individual and for the individual's own benefit pursuant to subsection 272-30(3) of Schedule 2F to the Income Tax Assessment Act 1936 ("ITAA 1936")? | A1: Yes.

Relevant facts and circumstances: 1. Trust B is an Australian tax resident trust. 2. The Trustee of Trust B is Company D, an Australian tax resident company. 3. Trust B is wholly owned by Trust C, an Australian tax resident trust. The Trustee of Trust C is Company E, an Australian tax resident company. 4. Company F is the investment manager of Trust C. Company F has an Australian Financial Services Licence ("AFSL") that covers providing financial services to wholesale clients and is responsible for the investment management activities of Trust C. 5. Trust C has been wholly owned by Trust A since its establishment, through a number of interposed subsidiary entities of Trust A. 6. Trust deed of Trust B provides that: a. The beneficial interest in Trust B shall be divided into Units; b. Each Unit confers an equal undivided interest in the Trust B assets. A Unit does not confer any interest in a particular asset; c. The Trustee must hold the assets on trust for the Unitholders; d. A single register has to be kept in which details of the holders of Units are recorded; e. For each distribution period, the Trustee must calculate and distribute each Unitholder's distribution entitlement or allocation. f. Any distribution of capital is to be in proportion to the units held by the Unitholders. 7. Trust B is an Attribution Managed Investment Trust ("AMIT") from the year ended 30 June 20XX under Division 276 of the ITAA 1997. Trust A 8. Trust A is a Foreign open-ended alternative investment fund ("AIF"). 9. Trust A is tax resident in Foreign Country and governed by the Foreign Investment Tax Act. 10. The investment manager of Trust A is Foreign Company. 11. Foreign Company for account of Trust A, directly holds XXXX% of Trust C and indirectly holds XXXX% of Trust C through a number of interposed subsidiary entities of Trust A. Relevantly, the relationship between Foreign Company and Trust A comprises the following elements: a. Foreign Company holds legal title to the assets of Trust A. b. The assets of Trust A, units of a trust or shares in a company, are property capable of being held on trust which initially arose from unitholders' contributions to Trust A. c. Unitholders are beneficially entitled to a proportion of the underlying assets of Trust A in accordance with their unit holding and receive income from the investment of the trust A assets by Foreign Company. d. The assets of Trust A are not held by Foreign Company for its own benefit, but rather Foreign Company is dealing with the assets of Trust A in the best interests of and for the account the unitholders of Trust A. 12. Trust A is established and marketed as an open-ended public mutual investment fund, it is distributed via different distribution channels and widely held with more than 50 members. 13. The general investment conditions of Trust A, as outlined in its prospectus and the provisions of the foreign regulatory Act, establish a fiduciary framework requiring the investment manager to act with expertise, honesty, care, and diligence. 14. The capital management company must acquire and manage assets in its own name for the common account of investors, acting independently of the depositary and solely in the interests of the investors. It is further obligated to uphold the integrity of the market and prioritise the best interests of the investment funds it manages or their investors. 15. Trust A has two classes of units on issue: AA and BB unit classes. The AA units are sold to retail investors and the BB units are sold to institutional investors. These different classes do not offer different rights to the unitholders; the difference between the classes is the fee calculation for the issue of units and differing redemption rights. 16. Trust A units entitle investors to receive a distribution based on net income, and do not carry a right to a fixed rate of return. 17. As at 31 March 20XX, Trust A had over XX million AA units and over X million BB units on issue. There is no investor registry, with thousands of retail investors, primarily foreign tax resident individuals and a few institutional foreign resident investors, investing in Trust A. 18. The identification of investors is unknown as the units are traded via brokers (generally large banks). Accordingly, Foreign Company has no knowledge of the parties to the trades. 19. Distributions are paid by Foreign Company to a bank account which is owned by a custodian bank. Custodian administers the bank account and distributes from this account to the individual brokers or to the depot banks of an investor which represent the ultimate investors. 20. Custodian has knowledge of the quantum of units that the broker or depot bank represents but no knowledge of the investors that sit behind the brokers. The relevant brokers or depot bank potentially have hundreds or thousands of accounts with the investors. 21. The brokers and depot banks distribute investment returns to their respective clients based on unit holdings. However, the identity of the ultimate investors is not known to any party in the distribution chain except the brokers or depot banks themselves. There is no practical mechanism by which Foreign Company to obtain or verify the identities of these ultimate investors under Foreign law. 22. Trust B is unable to identify any change before or after the test times in the individual unitholders of Trust A. 23. Trust B is not aware of any change or future change to the capital structure or unitholding of Trust A that would allow them to identify individual entitlement holders. 24. Trust B is not aware of any transactions that could cause a change in the upstream investment structure. 25. Trust C will continue to own all the units in Trust B and Trust A will continue to indirectly own all the units in Trust C.

Relevant legislative provisions: Income Tax Assessment Act 1936 schedule 2F | Income Tax Assessment Act 1936 Division 266 of Schedule 2F | Income Tax Assessment Act 1936 section 269-50 of Schedule 2F | Income Tax Assessment Act 1936 subsection 269-50(1) of Schedule 2F | Income Tax Assessment Act 1936 subsection 269-50(2) of Schedule 2F | Income Tax Assessment Act 1936 section 269-55 of Schedule 2F | Income Tax Assessment Act 1936 subsection 269-55(1) of Schedule 2F | Income Tax Assessment Act 1936 section 272-30 of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-30(1) of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-30(3) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-30(3)(a) of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-30(4) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-30(4)(a) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-30(4)(b) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-30(4)(c) of Schedule 2F | Income Tax Assessment Act 1997 subdivision 36-A,

Reasons for decision: Summary: This ruling relates to whether the Commissioner would exercise the discretion contained in subsection 272-30(3) to the Trust B at particular times (referred to as 'test times' by subsection 272-30(1)) for the purpose of determining whether one or more prior year tax losses of the Trust B are deductible under Schedule 2F. | Detailed Reasoning - The deductibility of tax losses: Tax losses are generally deductible under Subdivision 36-A of the Income Tax Assessment Act 1997 ('ITAA 1997') in the order in which they are incurred. However, Division 266 requires that a fixed trust must, in some circumstances, 'pass the 50% stake test' in respect of certain times during a 'test period' in order to deduct the tax losses. The current 'test period' for the purposes of Division 266 and the 50% stake test is 1 July 20XX to 30 June 20XX. Consequently, Trust B must 'pass the 50% stake test' in respect of one or more times between 01 July 20XX and 30 June 20XX inclusive. | Detailed Reasoning - Passing the 50% stake test: A trust will 'pass the 50% stake test' in relation to two times or at all times during a period in the circumstances outlined in section 269-55, which states: 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) (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. (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. The term 'more than a 50% stake' is itself defined by section 269-50, which states: | Detailed Reasoning - More than a 50% stake in income or capital: 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. (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. Consequently, for the Trust B to pass the 50% stake test under subsection 269-55(1), the same individuals must have, directly or indirectly and for their own benefit, fixed entitlement to a greater than 50% share of income and capital of the Trust B at the relevant time or times during the test period. In this case, due to the circumstances of the Trust B and the legislative background described above, the relevant test time or times all fall between 01 July 20XX and 30 June 20XX inclusive. | Detailed Reasoning - The Commissioner's discretion: Subsection 272-30(3) of Schedule 2F to the ITAA 1936 is a concessional provision which relevantly exists to assist in tracing ownership interests through widely held trusts (or a listed public company as is relevant). As noted in the Explanatory Memorandum (EM) below, such ownership interests can often prove difficult to trace due to the large number of unit holders and the likelihood that individuals will not hold units in a widely held trust directly. Relevantly, paragraphs 13.43 and 13.44 of the EM to Taxation Law Amendment (Trust Loss and other Deductions) Bill 1997 (Cth) provide some guidance as to the legislative intent of the Commissioner's discretion in subsection 272-30(3): 13.43 There are considerable practical difficulties in tracing interests in or through listed public companies, because of the large number of shareholders and the likelihood that individuals will not hold shares in the listed public company directly. Similar problems arise for widely held unit trusts. The main problem is that it may be difficult, in particular cases, to identify all the direct and indirect holders of fixed entitlements in those entities. 13.44 A provision has been included in the Bill to assist in overcoming difficulties in appropriate cases. This provision will allow the Commissioner to treat all or part of the fixed entitlements in a trust (or interposed entity where relevant) held, directly or indirectly, by a listed public company or widely held unit trust as being held by that company or trust as an individual for its own benefit. The application of subsection 272-30(3) of Schedule 2F to the ITAA 1936 Subsection 272-30(3) of Schedule 2F relevantly provides the Commissioner with a discretion to treat all or part of the fixed entitlements in a trust as being held directly or indirectly, by a widely held unit trust (per subsection 272-30) as being held by that trust as an individual for its own benefit. The Commissioner may exercise this discretion favourably where he considers it fair and reasonable to do so having regard to the matters set out in subsection 272-30(4) (per subsection 272-30(3)(b)). Specifically, subsections 272-30(3) and 273-30(4) state: | Detailed Reasoning - 272->30 Additional special cases of fixed entitlements held directly or indirectly: ... Interposed listed public companies and widely held unit trusts 3. If: a) at the test time a listed public company or widely held unit trust has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity; and b) (b) having regard to the matters set out in subsection (4), the Commissioner considers it fair and reasonable to treat the company or trust as holding, at the test time, the whole or part of its fixed entitlement as an individual and for the individual's own benefit; the company or trust is treated as so holding the whole or the part of its fixed entitlement. Matters for the purposes of paragraph (3)(b) 4. For the purposes of paragraph (3)(b), the matters are: a) the practicability of identifying any individuals who at the test time have fixed entitlements to a share of the income or capital of the main entity indirectly through the company or trust and for their own benefit; and b) (b) any change before or after the test time in the individuals who can be identified as having fixed entitlements of the kind mentioned in paragraph (a); and c) (c) any other matter that the Commissioner considers relevant. Therefore, before subsection 272-30(3) of Schedule 2F to the ITAA 1936 can be applied, it must be established that at the test time, a widely held unit trust (or a listed public company) has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity. In this case, the main entity is Trust B. Trust A governed by the foreign investment tax act for foreign tax purposes and treated as "opaque" from a foreign tax perspective and generally subject to foreign corporate income tax. Therefore, it will need to be determined whether the Trust A is a widely held unit trust for Australian tax purposes. The definition of "trust" in subsection 128A(3) of the ITAA 1936 as examined in ATO ID 2008/61 is the same as that used in Schedule 2F of the ITAA 1936. The term "trust" is defined in section 317 of the ITAA 1936 as a) an entity in the capacity of trustee (including an entity that manages a trust if there is no trustee); or b) as the case requires, a trust or trust estate. " There is no further guidance in the ITAA 1936 and ITAA 1997 on what constitutes a "trust" for Australian tax purposes. ATO ID 2008/61 Income Tax: Withholding Tax Exemption: interest and dividends paid by an Australian resident and received by a Dutch Stichting as unitholder in an Irish Common Contractual Fund provides that, in respect of the particular arrangement in that decision, the relationship between the manager, custodian and the unitholder constitute a trust relationship. ATO ID 2008/61 refers to French J in Harmer & Ors v. FC of T 89 ATC 5180; (1989) 20 ATR 1461 who stated that a trust 'is notably a definition of a relationship by reference to obligations'. Further, ATO ID 2008/61 provides the following: His Honour went on to state that the four essential elements of a trust are: 1. the trustee who holds a legal or equitable interest in the trust property 2. the trust property which must be property capable of being held on trust and which includes a chose in action 3. one or more beneficiaries other than the trustee, and 4. a personal obligation on the trustee to deal with the trust property for the benefit of the beneficiaries, which obligation is also annexed to the property. Therefore, applying the elements outlined above to the Trust A, the following observations are noted: a. Foreign Company holds legal title to the assets of the Trust A. b. The assets of the Trust A, real property, units of a trust or shares in a company, are property capable of being held on trust. c. The Trust A has more than one beneficiary other than Foreign Company. d. The assets of the Trust A are not held by Foreign Company for its own benefit, but rather Foreign Company as investment manager is dealing with the assets of the Trust A in the best interests of and for the account the unitholders of the Trust A. e. The general investment conditions of Trust A, as outlined in its prospectus and the provisions of the Foreign regulatory Act, establish a fiduciary framework requiring the investment manager to act with expertise, honesty, care, and diligence. The capital management company must acquire and manage assets in its own name for the common account of investors, acting independently of the depositary and solely in the interests of the investors. It is further obligated to uphold the integrity of the market and prioritize the best interests of the investment funds it manages or their investors. Based on the above rights and obligations and consistent with ATO ID 2008/61, we consider that the Trust A is in the nature of a trust for Australian tax purposes as a 'trust' relationship appears to exist between the investors and Foreign Company. Widely Held Unit Trust As noted above, before subsection 272-30(3) of Schedule 2F to the ITAA 1936 can be applied, it must be established that at the test time, a widely held unit trust (or a listed public company) has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity. Section 272-105(1) of Schedule 2F to the ITAA 1936 provides that: A trust is a widely held unit trust if: • It is a fixed trust that is also a unit trust, and • It is not closely held (as defined in subsection (2)). Section 272-105(2) provides that a trust is closely held if either of the following tests are satisfied: • Income Test: ­ An individual, or up to 20 individuals together, directly or indirectly and for their own benefit, have fixed entitlements to 75% or more of the income of the trust. • Capital Test: ­ An individual, or up to 20 individuals together, directly or indirectly and for their own benefit, have fixed entitlements to 75% or more of the capital of the trust. Trust A two classes of units on issue: AA and BB unit classes. The AA units are sold to retail investors and the BB units are sold to institutional investors. The rights of the investors of a unit class are evidenced in a global certificate or issued as electronic unit certificates. Investors may in principle exercise the right to redeem their units on each trading day. Units are also issued on each trading day. The units may have different design features, in particular with regard to the appropriation of income, the front-end load, the redemption fee, the currency of the unit value, the management fee, the minimum investment amount, or a combination of these features (unit classes). Trust A units are traded on various mediums and bank trading platforms. As at 31 March 20XX, Trust A had over XX million AA units and over X million BB units on issue and a net asset value of approximately XX billion. There is no investor registry, with thousands of retail investors, primarily foreign tax resident individuals and a few institutional foreign resident investors, investing in Trust A. Trust A is considered to be a widely held unit trust. | Detailed Reasoning - Fixed Entitlements: Trust A holds its interest in Trust B indirectly through a chain of interposed entities. Therefore, subsection 272-30(3) of Schedule 2F to the ITAA 1936 may apply to trust A provided it has indirectly , a fixed entitlementto a share of the income or capital of Trust B. Section 272-20 of Schedule 2F to the ITAA 1936 states: 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. Therefore, to satisfy section 272-20 of Schedule 2F to the ITAA 1936, there must be a chain of fixed entitlements from Trust B to Trust A. This means establishing that each entity has a fixed entitlement in the entity in which it holds a direct interest. Trust A elected to be an AMIT from the year ended 30 June 20XX under Division 276 of the Income Tax Assessment Act 1997 and has lodged AMIT tax returns in each subsequent income year. In this regard, section 276-55 sets out two effects that arise from qualifying as an AMIT for an income year. They are: • a trust that is an AMIT for an income year is to be treated as a fixed trust for that income year, and • each entity that is a member of an AMIT for an income year is to be treated as having a vested and indefeasible interest in a share of the income and capital of the AMIT throughout the income year. Therefore, in relation to the year ended 30 June 20XX and subsequent years, on the basis Trust A is an AMIT, Trust A is deemed to be a fixed trust and its members are deemed to have a fixed entitlement for the purposes of applying the trust loss rules in Sch 2F of the ITAA 1936. Paragraph 272-30(4)(a) - The practicability of identifying any individuals who at the test time have fixed entitlements to a share of the income or capital of the main entity indirectly through the company for their own benefit In regard to paragraph 272-30(4)(a) of Schedule 2F to the ITAA 1936, the following is taken into consideration to show the impracticability of identifying individuals who had fixed entitlements at the test times: • The scale of Trust A's unitholding would make tracing individual entitlements difficult. As at 31 March 20XX, Trust A had over XX million AA units and over XX million BB units on issue and a net asset value of approximately XX billion. • There is no investor registry, with thousands of retail investors, primarily foreign tax resident individuals and a few institutional foreign resident investors, investing in Trust A. Foreign Company has no or only a very limited information about the structure of Trust A's unitholders. • The identification of investors unknown as the units are traded via brokers (generally large banks). Accordingly, Foreign Company has no knowledge of the parties to the trades. • Distributions are paid by Foreign to a bank account which is owned by a custodian bank. Custodian administers the bank account and distributes from this account to the individual brokers or to the depot banks of an investor which represent the ultimate investors. • Custodian has knowledge of the quantum of units that the broker or depot bank represents but no knowledge of the investors that sit behind the brokers. The relevant broker or depot bank would potentially have hundreds or thousands of accounts with the investors. • The brokers or depot banks would distribute the received distribution to the investors they represent based on their unitholding owned. Accordingly, no one in the chain knows the identity of the ultimate investors (other than the brokers or depot banks, respectively) and there is no way of obtaining this information. Further, there is no foreign law that requires or enables Foreign Company to be able to obtain this information or identify the ultimate investor since this is, from a factual perspective, not possible. Considering the facts provided by the applicant and the guidance provided by the EM, the Commissioner accepts that, in this case, it is not practicable to trace individual shareholding for the purpose of the 50% stake test. | Detailed Reasoning - Paragraph 272-30(4)(b) - Any change before or after the test time in the individuals who can be identified as having fixed entitlement: • The Applicant has been unable to obtain a unitholding list and, as such, is not able to identify individual entitlement holders. • The Applicant has advised that they are unable to identify any change before or after the test times in the individual unitholders of Trust A. • The Applicant is not aware of any change or future change to the capital structure or unitholding of Trust A that would allow them to identify individual entitlement holders. The Commissioner accepts that, it is impractical and problematic to identify any individuals and consequently any meaningful changes in individual shareholdings before and after the test times. | Detailed Reasoning - Paragraph 272-30(4)(c) - Any other matters that the Commissioner considers relevant.: The Commissioner considers the following other matters to be relevant: • The Applicant is not aware of any transactions that could cause a change in the upstream investment structure. • Trust C will continue to own all of the units in Trust B and Trust A fund will continue to indirectly own all of the units in Trust C. | Detailed Reasoning - Conclusion: Having regard to the matters set out in subsection 272-30(4) of Schedule 2F to the ITAA 1936 the Commissioner considers it fair and reasonable to treat Trust A as holding the whole of its fixed entitlement as an individual and for the individual's own benefit for the purposes of subsection 272-30(3) of Schedule 2F to the ITAA 1936 for each test time which occurs within the ruling period.