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 The tracing rule which could effectively treat a trading unit trust as a public trading trust has been repealed effective from 1 July 2016.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.
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.