The Federal Court, in the decision of Elecnet (Aust) Pty Ltd v FCOT, has ruled that a trust established to pay out redundancy benefits for employees of the electricity industry was a unit trust for the purposes of the public trading trust rules. This was held notwithstanding that the employees’ interest in the trust is not unitised but rather operates in a way that is akin to a superannuation fund. In coming to this conclusion, the Court found, for the purposes of the public trading trust rules, that the employees have a beneficial interest in the property of the trust.
This is an important decision for superannuation funds investing in non-unit trusts such as fixed trusts and bare trusts. This decision makes it clear that such trusts will almost invariably be “unit trusts” under the public trading trust rules and consequently that the public trading trust regime must be considered for such structures.
One of the consequences of a trust being deemed to be a public trading trust is that the trust’s income will be taxed at the corporate tax rate and the flow through nature of the trust will be lost.
For more information on public trading trusts see our article - Superannuation funds and public trading trusts or contact: