Public trading trusts are taxed as if they were companies rather than the flow through taxation that applies to ordinary trusts. Therefore to avoid this problem, stapled arrangements are entered into where the trust carries on an eligible investment business and the company carries on the trading business. However if, at any time during the year of income, the trustee controlled, or was able to control, directly or indirectly, the affairs or operations of the company in respect of the carrying on by that company of a trading business then the unit trust will still be a public trading trust.

The Commissioner has issued an interpretative decision that indicates that control for these purposes does not only include where say the trust has a control through majority voting power of the company but will also apply where the trustee of the trust holds a veto power over matters that go to the structure, scope and management of the company’s business. Thus a trust with a minority shareholding in a company may still control that company if it has a power of veto in relation to issues relating to the structure, scope and management of the company’s business.