The finding in the Aussiegolfa decision that deemed the SMSF trustee’s property held by fractional property investment house DomaCom is a separate trust will not have a significant impact on traditional multi-class managed funds, according to the ATO.
The regulator released its decision impact statement today after the full Federal Court recently handed down a favourable decision for the trustee in question regarding the leasing to a related party of a property held in a DomaCom sub-fund where an SMSF is the owner of units in the sub-fund.
The court, however, decided in the case of Aussiegolfa Pty Ltd (trustee) v Federal Commissioner of Taxation that the investment of the Benson Family Super Fund (BFSF) in the Burwood sub-fund was an investment in a related trust and an in-house asset under subsection 71(1) of the Superannuation Industry (Supervision) (SIS) Act.
Furthermore, the court found the terms governing the Burwood sub-fund “evidences an intention to create a distinct trust very much separate from any other sub-funds or trusts created by the DomaCom constitution”.
In its decision impact statement, the ATO said while the decision offers valuable guidance on how it is determined whether a separate trust has been created, it does not expect this case will significantly affect traditional multi-class funds.
“For example, a single trust with multiple classes will be entitled to make the attribution managed investment trust multi-class election under section 276-20 of the Income Tax Assessment Act 1997, where the requirements of that section are otherwise satisfied,” it said.
The ATO made it clear the finding the Burwood sub-fund constituted a separate trust was based on the specific facts of the arrangement.
“Whether classes of a trust are in fact separate trusts will depend on the particular facts and circumstances of each case having regard to factors considered by the court, including the relevant governing and disclosure documents, the ‘terms of issue’ of the class and the general law concept of a trust,” it said.
With regard to the sole purpose test, the ATO commissioner repeated the court decision was based on the specific facts of the case.
An important aspect of the arrangement was the Burwood property had been leased to two tenants unrelated to the BFSF for two years before subsequently being leased to the daughter of the member of the SMSF.
The daughter paid equivalent market rent similar to previous tenants and there was no suggestion leasing the property to the daughter influenced the fund’s investment policy.
“We do not consider that the case is authority for the proposition that a superannuation fund trustee can never contravene the sole purpose test when leasing an asset to a related party simply because market value rent is received,” the ATO said.
