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Will Trust A qualify as a MIT on the basis that Trust A satisfies the requirements in paragraph 275-10(2)(b) and section 275-55 of the Income Tax Assessment Act (ITAA 1997)?

Yes This ruling applies for the following period : 1 October 20XX to 30 September 20XX The scheme commences on: 1 October 20XX

1.  Trust A is a subsidiary of a stapled trust, the stapled securities are listed on a Foreign Securities Exchange. 2.  The principal activities of the stapled trust and its subsidiaries involve long term investment in real estate assets located in Australia. 3.  The units of Trust A are equally owned, with 50% held by a foreign trust and 50% by a foreign company. 4.  Trust A holds Australian assets through various subtrusts, whose trustees are all Australian tax residents. 5.  Trust A has a 30 September substituted accounting period and made the choice to elect into the attribution managed investment trust (AMIT) regime during the income year ended 30 September 20XX. 6.  In 20XX, a foreign related Company A announced a proposed additional share placement. The Trustee of Trust A was not advised of the placement before this date because this was a price sensitive transaction and needed to be kept confidential.

7.  Pursuant to the irrevocable undertakings issued by each shareholder, their pro rata entitlements under the placement resulted in an increase in their effective stakes. Consequently, each unitholder, in their individual capacity, experienced an increase in their MIT participation interest in Trust A. 8.  During a certain period the MIT participation interest in Trust A held by two foreign resident individuals increased from 9.95% to 10.21%. 9.  The change in the MIT participation interest was discovered on a date after the completion of the placement which was announced by in 20XX. 10.  To address the change, a share sale was executed , each unitholder's MIT participation interest in Trust A was reduced to 9.98%.

Income tax assessment Act 1997 section 275-10 Income tax assessment Act 1997 paragraph 275-10(2)(b) Income tax assessment Act 1997 paragraph 275-30(1)(c) Income tax assessment Act 1997 section 275-40 Income tax assessment Act 1997 subsection 275-40(1) Income tax assessment Act 1997 section 275-55

Detailed reasoning Under paragraph 275-30(1)(c), a trust will fail to satisfy the closely-held restriction if, at any time during the income year, a foreign resident individual holds a MIT participation interest of 10% or more in the trust. A MIT participation interest is defined in subsection 275-40(1) and includes situations where an entity (such as a foreign resident individual), directly or indirectly: (a)         Holds or has the right to acquire interests representing a percentage of the value of the interests in the trust; (b)         Has control of, or the ability to control, a percentage of the rights attaching to membership interests in the trust; (c)         Has the right to receive a percentage of any distribution of income that the trust may make. In this case, an increase in foreign resident individual's effective stake, in their individual capacity, holding a 10.21% MIT participation interest in Trust A exceeded the 10% threshold outlined in paragraph 275-30(1)(c) of the ITAA 1997, thereby breaching the closely-held restriction. As a result, Trust A is disqualified from being treated as a MIT for that income year. Paragraph 275-10(2)(b) relevantly states:

A trust is also a managed investment trust in relation to an income year if any of the following requirements are met: (b)         the trust is covered under section 275-55 in relation to the income year (temporary circumstances outside the control of the trustee). Section 275-55 states: A trust is covered under this section in relation to an income year if: (a)         apart from a particular circumstance, the trust would be a *managed investment trust in relation to the income year; and (b)         the circumstance is temporary; and (c)         the circumstance arose outside the control of the trustee of the trust; and (d)         it is fair and reasonable to treat the trust as a managed investment trust in relation to the income year, having regard to the following matters: (i)       the matters in paragraphs (a) and (b); (ii)       the nature of the circumstance; (iii)       the actions (if any) taken by the trustee of the trust to address or remove the circumstance, and the speed with which such actions are taken;

(iv)       the extent to which treating the trust as a managed investment trust in relation to the income year would increase or reduce the amount of tax otherwise payable by the trustee, the *members of the trust or any other entity; (v)       any other relevant matter. The explanatory memorandum to the Tax Laws Amendment (2010 Measures No.1) Bill 2010 provides guidance on the above section (formerly section 275-30): Temporary circumstances 3.24 If, apart from a particular circumstance, a trust would be treated the same as a MIT, the trust may still be treated the same as a MIT if, the circumstance is temporary and arose outside the control of the trustee of the trust, and it is fair and reasonable to the treat the trust the same as a MIT, having regard to a number of factors. These factors include: the nature of the circumstance, the actions (if any) taken by the trustee of the trust to address or remove the circumstance, the speed with which such actions were taken, and the tax impact of such a decision. [Schedule 3, item 4, section 275-30 of Division 275 of Part 3-25] In this case, it is considered that:

•                     apart from the change, Trust A would be a managed investment trust and the change was temporary, i.e., the change existed between the certain dates being a period of days, •                     the change arose outside the control of the Trustee. This change was due to the fact that not all shareholders in Company A took up their pro rata entitlement under the Company A Rights Issue. Because of regulatory requirements and Company A's confidentiality policies and practices, Company A was not able to provide the Trustee with prior notice of the of the Company A Rights Issue. The Trustee was not able to control the Company A Rights Issue nor which shareholders took up their pro rata entitlement •                     there is no evidence to suggest that by treating Trust A as a MIT would increase or reduce the amount of tax otherwise payable by the Trustee, •                     the actions and steps following the discovery of the change a day after the completion of the Company A's Rights Issue and the timing of implementing these actions and steps indicated the intention of the Company A group to rectify the change as soon as possible.

Therefore, having regard to the above matters, for the purposes of section 275-55, the Commissioner considers that it is fair and reasonable to treat Trust A as a MIT in relation to the income year ending 30 September 20XX. Accordingly, Trust A will qualify as a MIT in relation to the income year ending 30 September 20XX on the basis that it satisfies the requirements in paragraph 275-10(2)(b) and section 275-55.