Tax Bites

SMSF investors in unit trusts no longer to result in terrible tax outcomes

31st May 2016

  • In November 2013 I wrote a Tax Bite regarding unit trusts that carry on a business (trading unit trusts) and the terrible tax outcomes that can arise where the unit trusts were owned 20% or more by SMSFs – this was known as the tracing rule.
  • This was particularly important for SMSFs investing in unrelated geared unit trusts.
  • In broad terms, those trading unit trusts could in certain circumstances be taxed effectively like a company under the Public Trading Trust rules, losing a lot of the benefits that come with unit trusts like access to the general CGT discount.
  • Well, good news!  The tracing rule which could effectively treat a trading unit trust as a public trading trust has been repealed effective from 1 July 2016.
  • If this applies to you or your clients, you should review the complicated transitional provisions that can apply through to 1 July 2018.
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About Tax Bites

Tax Bites are general in nature and are not a substitute for specific advice. They are the opinion of Tax Advisory Specialists, and the ATO or the Courts may take a different view. They are not updated for changes in the law or the interpretation of the law since publication.


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