Income Tax Act

Definition of Australian trust

• 93.3 (1) In this section, Australian trust, at any time, means a trust in respect of which the following apply at that time:

  • (a) in the absence of subsection (3), the trust would be described in paragraph (h) of the definition exempt foreign trust in subsection 94(1);

  • (b) the trust is resident in Australia;

  • (c) the interest of each beneficiary under the trust is described by reference to units of the trust; and

  • (d) the liability of each beneficiary under the trust is limited by the operation of any law governing the trust.

• Marginal note:Conditions for subsection (3)

  (2) Subsection (3) applies at any time to a taxpayer resident in Canada in respect of a trust if

  • (a) a non-resident corporation is at that time beneficially interested in the trust;

  • (b) the non-resident corporation is at that time a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest;

  • (c) the trust is at that time an Australian trust;

  • (d) the total fair market value at that time of all fixed interests (in this section as defined in subsection 94(1)) of a class in the trust held by the non-resident corporation, or persons or partnerships that do not deal at arm’s length with the non-resident corporation, is at least 10% of the total fair market value at that time of all fixed interests of the class; and

  • (e) unless the non-resident corporation first acquires a beneficial interest in the trust at that time, immediately before that time (referred to in this paragraph as the “preceding time”) subsection (3) applied

    • (i) to the taxpayer in respect of the trust, or

    • (ii) to a corporation resident in Canada, that at the preceding time did not deal at arm’s length with the taxpayer, in respect of the trust.

• Marginal note:Australian trusts

  (3) If this subsection applies at any time to a taxpayer resident in Canada in respect of a trust, the following rules apply at that time for the specified purposes:

  • (a) the trust is deemed to be a non-resident corporation that is resident in Australia and not to be a trust;

  • (b) each particular class of fixed interests in the trust is deemed to be a separate class of 100 issued shares, of the capital stock of the non-resident corporation, that have the same attributes as the interests of the particular class;

  • (c) each beneficiary under the trust is deemed to hold the number of shares of each separate class described in paragraph (b) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class;

  • (d) the non-resident corporation is deemed to be controlled by the taxpayer resident in Canada  — a foreign affiliate of which is referred to in paragraph (2)(b) and is beneficially interested in the trust  —  that has the greatest equity percentage in the non-resident corporation;

  • (e) a particular foreign affiliate of the taxpayer in which the taxpayer has a direct equity percentage (as defined in subsection 95(4)) at a particular time, and that is not a controlled foreign affiliate of the taxpayer at that time, is deemed to be a controlled foreign affiliate of the taxpayer at that time if, at that time,

    • (i) the particular affiliate has an equity percentage (as defined in subsection 95(4)) in the foreign affiliate referred to in paragraph (2)(b), or

    • (ii) the particular affiliate is the foreign affiliate referred to in paragraph (2)(b); and

  • (f) section 94.2 does not apply to the taxpayer in respect of the trust.

• Marginal note:Specified purposes

  (4) For the purposes of subsection (3), the specified purposes are

  • (a) the determination, in respect of an interest in an Australian trust, of the Canadian tax results (as defined in subsection 261(1)) of the taxpayer resident in Canada referred to in subsection (3) for a taxation year in respect of shares of the capital stock of a foreign affiliate of the taxpayer;

  • (b) the filing obligations of the taxpayer under section 233.4; and

  • (c) if the taxpayer is a corporation resident in Canada, the application of section 212.3 in respect of an investment (as defined in subsection 212.3(10)) by the taxpayer.

• Marginal note:Mergers

  (5) For the purposes of this section,

  • (a) if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; and

  • (b) if there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.