Issue
Is a partnership, in which a company acting as trustee is a partner, an associate of shareholders of that company where the shareholders are natural persons?
Decision
No. A partnership, in which a company acting as trustee is a partner, is not an associate of shareholders of that company where the shareholders are natural persons.
Facts
A Pty Ltd ('the company') is trustee of the B trust ('the trust').
The company has two shareholders ('the shareholders'). The shareholders are natural persons.
The company and the shareholders are beneficiaries of the trust.
The company, as trustee of the trust, is a partner ('the partner') in D ('the partnership').
The other partner is otherwise unrelated to the company, the trust and the shareholders.
Reasons for Decision
As the shareholders of the company are natural persons, subsection 318(1) of the Income Tax Assessment Act 1936 (ITAA 1936) is relevant.
Under subsection 318(1) of the ITAA 1936 the associates of a natural person (other than in the capacity of trustee) are: (a) a relative (b) a partner of the person or a partnership in which the person is a partner (c) if a partner of the person is a natural person otherwise than in the capacity of trustee - the spouse or a child of that partner (d) a trustee of a trust where the person, or another entity that is an associate of the person because of another paragraph of subsection 318(1), benefits under the trust, or (e) a company which is controlled by the person.
The relevant paragraph is paragraph 318(1)(b) of the ITAA 1936. As the shareholders are not partners in the partnership, the partnership is not an associate of the shareholders under paragraph 318(1)(b) of the ITAA 1936.
Amendment History
Date of Amendment Part Comment 24 August 2015 Related ATO IDs Removed section. Reference number Added Siebel reference.
Date of Amendment | Part | Comment
24 August 2015 | Related ATO IDs | Removed section.
Reference number | Added Siebel reference.