• Service: Tax, Dispute Resolution
  • Type: Regulatory update
  • Date: 24/06/2014

Tax Insights

KPMG's analysis of tax issues and developments.

David Marschke

David Marschke
Director, Tax

+61 7 3233 3129

Fixed trust for tax purposes – continuing uncertainty 

by David Marschke, Tax Law Specialist

In the lead up to 30 June it is timely to revisit the continuing uncertainty regarding what constitutes a fixed trust for income tax purposes. Critically, in light of the comments in Colonial First State Investments (a 2011 decision by Justice Stone), it cannot be assumed that a unit trust will qualify as a fixed trust.

The types of clauses in a unit trust deed that can cause a trust to be non-fixed include an ability to redeem or allot units other than for market value, the ability to allot partly paid units, the existence of special class units, the trustee having a wide ranging amendment power without requiring unanimous consent of all unit holders and the trustee having a power to make gifts.


The characterisation as a fixed trust is fundamental to a range of provisions within the tax law including determining the applicable trust losses recoupment tests to be applied, is essential to enable franking credits to be passed through to beneficiaries and to determining whether income received by a superannuation fund as a unitholder is ‘non-arm’s length income’ taxed at 47 percent.


Although the Federal Government has committed to a ‘legislative fix’, the existing uncertain position continues to be relevant pending the finalisation of the review into the taxation of trusts. As a consequence unit trust deeds should be reviewed and amended if permissible to the extent it is essential that the trust be a fixed trust.


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