Michael Hallinan

A recent Private Binding Ruling issued by the ATO (PBR 1051209890341) has held that an entity established in Liechtenstein (a small county between Switzerland and Austria) as a Stiftung (aka Foundation) was to be treated for Australian tax purposes as a resident tax estate.

A Stiftung is a separate legal entity which has capital and is able to gift its capital to or amongst certain persons.

In short, it is like a company (in that it is has legal personality separate from its founders, controllers or beneficiaries) and it is the absolute owner of its own capital.

However, unlike a company, it can gift its capital to the beneficiaries.  So it is like a trust – but a trust does not have separate legal personality and the trustee is not the absolute owner of the trust assets.

The PBR held that the Stiftung effectively satisfied the essential requirements of a trust and so would be taxed in Australia as a trust estate.

Further, the PRB held that the Stiftung was a resident trust estate for Australian taxation purposes which could make a family trust election.

The reasoning of the PBR was that as the Stiftung board constituted the controlling mind of the entity, that the board was precluded from benefiting and only specified individuals could be allocated payments from the Stiftung, entity was essentially a trust like structure.

Further, as the founder of the Stiftung controlled the board (ie they acted upon and at his instructions) the central management and control of the Stiftung was in Australia and the founder was an Australian tax resident.

By Michael Hallinan, Special Counsel Superannuation

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