The trust was established as a result of various industrial agreements in the construction industry requiring employers to make weekly payments to a common fund for the ultimate benefit of employees who, inter alia, become redundant. Income from the trust’s investments would accumulate from year to year, without full present entitlement arising to it.
The only question to be decided by the AAT was whether it was a unit trust – there being no dispute as to the satisfaction of the other requirements of sec 102N(1).
The AAT noted that the definition of 'unit' in sec 102M is, firstly, qualified by the words 'in relation to a prescribed trust estate' and, secondly, is an inclusive definition, 'unit ... includes a beneficial interest, however described, in any of the income or property of the trust estate'. The AAT rejected the taxpayer’s argument that the definition of 'unit' was broad. The AAT referred to the 'circular definition of terms' and said:
"...the initial inquiry is whether there was a unit trust. That inquiry is made necessary because sec 102S makes reference to the 'trustee of a unit trust that is a public trading trust'. The definition of unit does not give an extended meaning in what may be comprehended as a unit trust; it merely makes clear that the unit holder must have a beneficial interest in some of the income or property of the trust estate.
In our view the applicant's case fails because the beneficial interests in the Fund were not divided into units, that is, discrete parcels of rights."