INVESTMENT CLUBS

Press, Volume C, Issue 29498, 27 April 1961, Page 20

INVESTMENT CLUBS

Tax Position Explained Though an amendment had been made to the law to deal with taxation of unit trusts, there were many small investment clubs through the country which did not come under the amending act or the Unit Trusts Act, 1960. the District Commissioner of the Inland Revenue Department (Mr D. A. Stevens) said. Generally, the clubs would be the same as a partnership or joint venture. Section 20 of the Land and Income Tax Amendment Act. 1960, inserted a new section in the principal act, the Land and Income Tax Act, 1954. Mr Stevens said. The key definition was that of a “unit trust.” and it was possible for a scheme to be a unit trust for tax purposes but not for the purposes of the Unit Trusts Act. In practice, however. most

schemes would be “unit trusts” under both enactments. Before the provision* Of either enactment could apply to a scheme or arrangement,’ it was fundamental that the scheme should be in the nature of a trust. This test was not satisfied if the scheme was merely * partnership. syndicate or joint venture, he said. In those cases, the members managed and controlled the organisation directly, and their rights stemmed directly from membership. and not from a fiduciary relationship. “Where a elub is formed and the members manage and control fee club directly without the intervention of a trustee, that is in essence the same as a partnership or joint venture,” he said. “It is neither in form nor in nature a trust. “This is not negated because of a rule merely enabling securities to be held in the name of two or three members as trustees for the club. Those persons would be in the position of custodians. and would not by virtue of their appointment manage and control the club.”