Issue
Does a group begin to control a non-fixed trust for the purposes of section 267-45 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) where a person ceases directorship of the corporate trustee but continues to control the trust as part of the original group?
Decision
No. Provided the cessation of directorship does not trigger the materialisation of a 'new' group that begins to control the trust directly or indirectly.
Facts
A and B are the joint directors of the corporate trustee of a non-fixed trust. As directors of the trustee company, A and B comprise the 'group' that controls the trust as defined by subsection 269-95(1) of Schedule 2F to the ITAA 1936 immediately prior to the test period. During the test period, B resigns directorship of the trustee company leaving A as the sole director. B continues to exercise the same amount of control of the trust before and after ceasing directorship of the corporate trustee. The control of the trust by the group remains unchanged in every aspect, notwithstanding this, the validity of the trust is preserved.
Reasons for Decision
Section 267-45 of Schedule 2F to the ITAA 1936 provides that a group must not begin to control the trust directly or indirectly during the test period (from the beginning of the loss year until the end of the income year).
A group controls a non-fixed trust pursuant to subsection 269-95(1) of Schedule 2F to the ITAA 1936. Group is defined in subsection 269-95(5) of Schedule 2F to the ITAA 1936 as a person, or a person and one or more associates, or two or more associates of a person.
As B continues to exercise the same amount of control of the trust before and after ceasing directorship of the corporate trustee, a group as defined by subsection 269-95(5) of Schedule 2F to the ITAA 1936, which differs from the original group, has not formed upon the resignation of B. Accordingly, no group begins to control the trust during the test period and section 267-45 of Schedule 2F to the ITAA 1936 will not apply.
Amendment History
Date of Amendment Part Comment 19 December 2014 Issue Change reference to section 269-95 to 267-45 of Schedule 2F to the ITAA 1936 Facts Remove reference to subsection 269-95(1) in the third paragraph Reasons for Decision Remove references to subsection 269-95(1) and reword the last sentence in the last paragraph
Date of Amendment | Part | Comment
19 December 2014 | Issue | Change reference to section 269-95 to 267-45 of Schedule 2F to the ITAA 1936
Facts | Remove reference to subsection 269-95(1) in the third paragraph
Reasons for Decision | Remove references to subsection 269-95(1) and reword the last sentence in the last paragraph