Gutteridge and Commissioner of Taxation  AATA 947
provides some valuable insights into when a person may be deemed to
'control' an entity, even if the person is not a director
or shareholder of the entity. While the case was concerned with
'control' in the context of small business CGT concessions,
self-managed superannuation fund (SMSF) trustees and their advisers
should take particular note, as the factors considered in
Gutteridge could easily apply in an SMSF context.
For SMSFs, if a related party 'controls' another entity
and the SMSF invests in that entity, the investment by the SMSF may
cause significant compliance issues (in-house assets) for the SMSF.
Determining 'control' involves a detailed analysis of the
structures, the people involved and their relationships, and the
related party rules often connect people who are seemingly
One of the tests for 'control' is to ask whether a
person is accustomed, or might reasonably be expected, to act in
accordance with the directions, instructions or wishes of
In Gutteridge, the sole director and shareholder of the
trustee of the trust in question was Ms McKenzie. In the particular
circumstances of this case, her father (Mr Gutteridge) was held to
control the trust ('from behind the scenes') for the
purposes of the small business CGT concessions, even though he was
not a director or shareholder of the trustee or the appointor, and
did not have a formal role in the management of the trust. In
making this decision, the Tribunal took into account that Ms
McKenzie routinely and consistently acted in accordance with her
father's wishes, he attended directors' meetings, and
external stakeholders were accustomed to dealing with Mr Gutteridge
in relation to trust affairs.
The Tribunal confirmed the need to look at how the entity is
actually managed, and considered the following factors may indicate
a person is accustomed to acting in accordance with another's
the controller's wishes or instructions are more than just
a mere factor that is considered;
the controller has superior bargaining power;
the controller in substance makes the decisions, even though
they are not formally appointed as a trustee or director (the fact
that Ms McKenzie was the sole director of the corporate trustee did
not automatically mean that she controlled the trust).
The Tribunal also noted that it is not necessary for all
decisions to be made by the controller, and it is enough if the
controller is involved in some decisions, or one or more important
The case illustrates that 'control' is not a
straight-forward issue, and goes beyond merely analysing formal
directorships and shareholdings. To avoid possible non-compliance,
SMSF trustees and their advisers should seek advice before
establishing any new structures involving related parties, and
review any existing structures where 'control' may be an
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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