EX 32 Exemption for Australian unit trusts with adequate turnover or distributions
Exemption

(1)

A person’s rights in a FIF in an income year are not an attributing interest if—

(a)

the rights are a direct income interest; and

(b)

the FIF is a unit trust; and

(c)

at all times in the year when the person holds a right in the unit trust, the unit trust is resident in Australia; and

(d)

at all times in the year when the person holds a right in the unit trust, the unit trust is not treated as resident in a country other than Australia under an agreement that—

(i)

is between Australia and that other country; and

(ii)

would be a double tax agreement if negotiated between New Zealand and that other country; and

(e)

the unit trust is, at all times in the year, not an entity described in schedule 25, part B (Foreign investment funds); and

(f)

at all times in the year when the unit trust makes a distribution to investors, there is an RWT proxy under section 15N of the Tax Administration Act 1994 for the unit trust and payments by the unit trust to the person; and

(g)

for the trust’s accounting year (the trust’s year) that ends in the person’s income year, the unit trust meets—

(i)

the 25% minimum share turnover test in subsection (2):

(ii)

the 70% minimum distribution test in subsection (7).

25% minimum turnover test

(2)

The 25% minimum turnover test requires that, for the trust’s year, the amount of total net realised gains calculated under subsection (3) must be 25% or more of the amount of total net unrealised gains at the end of the year calculated under subsection (5).

Calculation of total net realised gains

(3)

The amount of total net realised gains is calculated using the formula—

total disposal gain − total cost.

Definition of items in formula

(4)

In the formula in subsection (3),—

(a)

total disposal gain is the total of amounts derived from disposal of shares by the unit trust during the trust’s year:

(b)

total cost is the total cost to the unit trust of those shares.

Calculation of total net unrealised gains

(5)

The amount of total net unrealised gains is calculated using the formula—

total profitable shares − total cost.

Definition of items in formula

(6)

In the formula in subsection (5),—

(a)

total profitable shares is the total of the market values of shares of the unit trust that are—

(i)

held at the end of the trust’s year; and

(ii)

have a market value greater than or equal to their cost to the unit trust:

(b)

total cost is the total cost to the unit trust of those shares.

70% minimum distribution test

(7)

The 70% minimum distribution test requires that, for the trust’s year, the total amount of distributions by the unit trust during the trust’s year must be 70% or more of the total distributable gains for the trust’s year calculated under subsection (8).

Calculation of total distributable gains

(8)

The amount of total distributable gains is calculated using the formula—

closing equity + distributions − opening equity − contributions.

Definition of items in formula

(9)

In the formula in subsection (8),—

(a)

closing equity is the amount by which, at the end of the trust’s year, the market value of the unit trust’s assets is more than the market value of the unit trust’s liabilities:

(b)

distributions is the total amount of distributions to investors by the unit trust during the trust’s year:

(c)

opening equity is the amount by which, at the beginning of the trust’s year, the market value of the unit trust’s assets is more than the market value of the unit trust’s liabilities:

(d)

contributions is the total amount of contributions by investors to the unit trust during the trust’s year.

Currency

(10)

The calculations must be done in the currency of the unit trust’s financial accounts.

Defined in this Act: accounting year, attributing interest, company, direct income interest, FIF, income year, resident in Australia, resident in New Zealand, RWT proxy, share, unit trust, year

Compare: 2004 No 35 s EX 33D

Section EX 32: substituted, on 1 April 2008, by section 386 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section EX 32(1)(f): amended (with effect on 1 April 2008), on 7 December 2009, by section 29(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section EX 32(9)(d): amended (with effect on 1 April 2008), on 6 October 2009, by section 169(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).