This Draft Ruling, released on Wed 25.7.2012, sets out the Commissioner’s views as to when the interest in a company will be taken to be an interest that is held by a public unit trust that is a connected entity of the company for the purposes of para 974-80(1) of the ITAA 1997.
The Draft Ruling considers arrangements in the following situations:
- shares in a company are stapled to units in a public unit trust;
- the stapled securities are issued to investors to raise funds primarily for use in the business conducted by the company; and
- the funds raised are predominantly contributed to the public unit trust and then used by the trustee to acquire a debt interest in the company.
The Draft only considers para (a) of the connected entity definition in s 995-1 ie an associate of an entity. It broadly states that a public unit trust in a stamped group will be taken to be an associate of the company in the same stapled group (and therefore a connected entity of the company) where either:
- the trust is sufficiently influenced by the company (subpara 318(2)(e)(i) of the ITAA 1936); or
- the company is sufficiently influenced by the trust (subpara 318(2)(d)(i) of the ITAA 1936).
DATE OF EFFECT: When the final Ruling is issued, it is proposed to apply to years of income commencing both before and after its date of issue.
COMMENTS are due by 7 September 2012.
[LTN 142, 25/7]