Taxation Determination TD 96/4







This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). | 1. Yes, if the unit trust is one in which each unit holder has a proprietary interest in the underlying assets the subject of the trust deed: see Charles v. FC of T (1954) 90 CLR 598. | 2. Subsection 36A(2) applies if each unit holder has a proprietary interest in the underlying assets because: | 3. We accept, in a unit trust in which each unit holder has a proprietary interest in the underlying assets, that a unit holder has at least a beneficial interest in the assets held by the trustee of the unit trust. This form of unit trust is the most common form. | 4. However, unit trusts can have various hybrid forms and some confer on unit holders no proprietary interest in the underlying assets but only a right to receive a sum or sums of money calculated by reference to the value of the underlying assets. Unless the unit trust is one in which each unit holder has a proprietary interest in the underlying assets, section 36A does not apply. | Definition: 5. The expression 'trading assets' used in this Taxation Determination means assets of a business (being trading stock, standing or growing crops, crop stools or trees which have been planted and tended for the purpose of sale). | Example: Red and Blue Aussie operate a grazing business in partnership in central Western Australia. They decide to transfer the business and all its trading stock to the corporate trustee of a unit trust, Aussie Colours Unit Trust. Blue Aussie holds 250 units, being 25% of the total 1000 units, in the Aussie Colours Unit Trust. Red Aussie holds 250 units in the unit trust and a new investor, Rusty Aussie, holds the remaining 500 units. Under the trust deed, each unit holder has a proprietary interest in the underlying assets subject to the unit trust. | Subsection 36A(1) applies because Blue Aussie (and for that matter, Red Aussie) is one of the persons who owned the trading stock of the business before the change in ownership and has an interest in the trading stock after the change. The interest held by Blue Aussie after the change is the undivided fractional interest he or she holds as a unit holder in a unit trust in each of the assets held by the trustee of the unit trust. | There is nothing to suggest that subsection 36A(8), or any other subsection of section 36A, would operate to make ineffective an agreement made between the parties under paragraph 36A(2)(d). | Commissioner of Taxation 17 January 1996 | Previously issued as Draft TD 94/D68; TD 95/D13


Related rulings: TD 96/1 TD 96/2 TD 96/3
Legislative references: ITAA 36A; ITAA 36A(1); ITAA 36A(2); ITAA 36A(2)(d); ITAA 36A(8)
Case references: Charles v FC of T (1954) 90 CLR 598
Subject references: interests in a unit trust; trading assets ownership; trading stock; trustees; undivided fractional interest; unit trusts