Tax alert: Investment of surplus private company funds into hybrid unit trusts

By Stuart Dall - September 13, 2018

The Australian Taxation Office has recently removed from its website legal database the edited text of a private ruling regarding the investment of surplus funds of a private company into a hybrid unit trust.

It is unsurprising that the ruling has been removed, since the ATO had some months earlier added the rider at the header of the edited text that “This edited version has been found to be misleading or incorrect…[i]t does not represent the ATO's view of the relevant law”. Broadly, we understand that the ATO may have a view that anti-avoidance rules could apply to such structures depending on the particular manner, form or imperative for implementation of the particular structure.

To this end, taxpayers should be very wary of entertaining approaches by advisors presenting this style of structure as the tax planning panacea insofar as the deployment of surplus private company funds are concerned.

Furthermore, there should be no misapprehension that the provision of a private ruling to one person provides any protection for others who adopt the same structure. This is because a private ruling is only ever binding on the direct recipient.

Should you be approached by other advisors regarding the potential implementation of such structures, particularly those touted as being “proprietary” to the advisors promoting them, we strongly recommend that you discuss this further with your contact at Pitcher Partners.

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