Associate Rule

Associates rule introduction

Control of the assets and income of a designated private trust or a designated private company may be established by looking at the level of informal control that individuals or members of a couple hold through their associates. An associate is a person(s) or entity(s) who could be expected to act in accordance with the individual's or couple's wishes.

Categories of associates

Associates of an individual may include:

• a relative,
• an entity,
• an entity that is a declared associate of the individual,
• a business partner of the individual or a business partnership in which the individual is a business partner,
• if a business partner of the individual is an individual - the spouse or child of that business partner,
• a trustee of a trust, whether the trustee is an individual or other entity that is an associate of the individual,
• a company, where the company is sufficiently influenced by the individual or other entities that are associates of the individual,
• a company, in which a majority voting interest is held by the individual or other entities that are associates of the individual.

Application of the associates rule

The fact that a person is identified as an associate does not mean that they would automatically be attributed with the assets or income of the entity. If a person was not the source of the structure's funds, or in control of the structure, and had never received any benefit from the structure, they would not be attributed with control. If a person can show that a genuine gift or a genuine loan has been made to a private trust or private company, the associates rule will not apply. Nor will the associates rule apply if a person genuinely resigns their involvement in a controlled private trust or private company.