(a) deductions for bad debts under section 8‑1 (about general deductions) of the Income Tax Assessment Act 1997;
(b) deductions for bad debts under section 25‑35 (about bad debts) of the Income Tax Assessment Act 1997;
(c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year;
unless they exceed the total of the notional net incomes and the full year amounts. (If they equal or exceed that total, the trust does not have a net income for the income year.)
(5) If an amount remains, subtract from it the trust’s other full year deductions, in the order shown in subsection 268‑35(5), unless they exceed the amount remaining. (If they equal or exceed that amount, the trust does not have a net income for the income year.)
(6) The amount (if any) remaining is the trust’s net income for the income year.
268‑60 How to work out the trust’s section 36‑10 tax loss for the income year
(1) For the purposes of Division 36 (Tax losses of earlier income years) of the Income Tax Assessment Act 1997, instead of working out the trust’s tax loss for the year under section 36‑10 of that Act, it is worked out as follows.
(2) Total the notional losses.
(3) Add the amount (if any) by which the trust’s full year deductions of these kinds:
(a) deductions for bad debts under section 8‑1 (about general deductions) of the Income Tax Assessment Act 1997;
(b) deductions for bad debts under section 25‑35 ( about bad debts) of the Income Tax Assessment Act 1997;
(c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year;
exceed the total of:
(d) the notional net incomes (if any); and
To work out the notional net income: see sections 268‑30 and 268‑70.
(e) the full year amounts referred to in section 268‑40 (if any).
(4) If the trust derived exempt income, subtract its net exempt income as defined in section 36‑20 of the Income Tax Assessment Act 1997.
(5) Any amount remaining is the trust’s tax loss for the income year.
To find out how much of the tax loss can be deducted in later income years, see Division 266 or 267.
To find out how to deduct it, see section 36‑15 or 36‑17 of the Income Tax Assessment Act 1997.
Subdivision 268‑D—Rules that supplement Subdivision 268‑C if the trust is in partnership
268‑70 How to calculate the trust’s notional loss or net income for a period when the trust was a partner
(1) This section applies if at any time during a period the trust was a partner in one or more partnerships.
(2) The trust has a notional loss for the period if the total (the loss total) of:
(a) the deductions attributed to the period under section 268‑35; and
(b) the trust’s share of each notional loss (if any) of a partnership for the period;
exceeds the total (the income total) of:
(c) the assessable income attributed to the period under section 268‑40; and
(d) the trust’s share of each notional net income (if any) of a partnership for the period.
The notional loss is the amount of the excess.
Note: A notional loss is taken into account in working out the trust’s tax loss under section 268‑60.
(3) On the other hand, if the income total exceeds the loss total, the trust has a notional net income for the period, equal to the excess.
Note: A notional net income is taken into account in working out the trust’s net income under section 268‑45.
(4) If the trust has a notional net income for all periods in the income year, this Subdivision has no further application, and the trust’s net income for the income year is worked out in the usual way.
The usual way of working out net income is set out in section 95.
268‑75 How to calculate the trust’s share of a partnership’s notional loss or notional net income for a period if both entities have the same income year
(1) This section applies if at any time during a period the trust is a partner in a partnership that has an income year that begins and ends when the trust’s income year begins and ends.
(2) The partnership’s notional loss or notional net income for the period is worked out in the same way as the notional loss or notional net income of a trust.
(3) The trust’s share is calculated by dividing:
(a) the trust’s interest in the partnership’s net income or partnership loss of the income year;
by:
(b) the amount of that net income or partnership loss;
and expressing the result as a percentage.
(4) However, if the partnership had neither a net income nor a partnership loss, the trust’s share is a percentage that is fair and reasonable having regard to the extent of the trust’s interest in the partnership.
268‑80 How to calculate the trust’s share of a partnership’s notional loss or notional net income for a period if the entities have different income years
(1) This section applies if at any time during a period the trust is a partner in a partnership that has an income year that begins and ends at a different time from when the trust’s income year begins and ends.
(2) So much of the partnership’s net income or partnership loss of an income year as was derived during the period is a notional net income or notional loss of the partnership for the period. (For the purposes of this subsection, the partnership’s net income or partnership loss is calculated without taking account of the partnership’s full year deductions for that income year.)
Note: The partnership’s full year deductions are dealt with in section 268‑85.
(3) The trust’s share is calculated by dividing:
(a) the trust’s interest in the partnership’s net income or partnership loss of the income year;
by:
(b) the amount of that net income or partnership loss;
and expressing the result as a percentage.
268‑85 Trust’s full year deductions include a share of partnership’s full year deductions
(1) This section applies if at any time during the income year the trust is a partner in a partnership that has one or more full year deductions for the income year of the partnership that corresponds to the income year of the trust.
(2) The partnership’s full year deductions are treated as full year deductions of the trust, but only to the extent of the trust’s share.
(3) If the partnership’s income year is the same as the trust’s, the trust’s share is calculated by dividing:
(a) the trust’s interest in the partnership’s net income or partnership loss of the income year;
by:
(b) the amount of that net income or partnership loss;
and expressing the result as a percentage.
(4) However, if the partnership had neither a net income nor a partnership loss, the trust’s share is a percentage that is fair and reasonable having regard to the extent of the trust’s interest in the partnership.
(5) If the partnership’s income year does not begin and end at the same time as the trust’s income year, the trust’s share is a percentage that is fair and reasonable having regard to all relevant circumstances.
Division 269—Concepts and tests applied in Divisions 266 and 267
Subdivision 269‑A—Overview of Division
269‑5 What this Division is about
This Division explains the following concepts or tests that are used in preceding Divisions of this Schedule:
• abnormal trading;
• 50% stake test etc.;
• pattern of distributions test;
• control;
• business continuity test.
Subdivision 269‑B—Abnormal trading
269‑10 Trading
A trading in units in a unit trust occurs if there is an issue, redemption or transfer of, or other dealing in, the units.
269‑15 Abnormal trading—general
(1) There is an abnormal trading in units in a unit trust if there is a trading in the units that is abnormal having regard to all relevant factors, including:
(a) the timing of the trading, when compared to the normal timing for trading in its units; and
(b) the number of units traded, when compared to the normal number of units traded; and
(c) any connection between the trading and any other trading in units in the trust; and
(d) any connection between the trading and a tax loss or other deduction of the trust.
(2) There may also be an abnormal trading under any of the following provisions.
269‑20 Abnormal trading—suspected acquisition or merger
There is an abnormal trading in units in a unit trust if a trading occurs in its units that the trustee knows or reasonably suspects is part of an acquisition of the trust or merger of the trust with another trust.
269‑25 Abnormal trading—5% of units in a single transaction
There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if 5% or more of the units are traded in one transaction.
269‑30 Abnormal trading—suspected 5% of units in a series of transactions
(1) There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if the trustee knows or reasonably suspects that a person, or a person and one or more associates of the person, have acquired or redeemed 5% or more of the units in 2 or more transactions and would not have done so if the trust did not have a tax loss or other deduction.
(2) For the purposes of other provisions of this Schedule, the abnormal trading occurs at the time of the particular transaction that causes the 5% figure to be exceeded.
269‑35 Abnormal trading—20% of units traded, issued or redeemed over 60 day period
(1) There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if more than 20% of the units on issue at the end of any 60 day period were traded during the period.
(2) For the purposes of other provisions of this Schedule, the abnormal trading occurs at the end of the 60 day period.
269‑40 Abnormal trading—50% stake not maintained
(1) There is an abnormal trading in units in a wholesale widely held trust during a period if the trustee knows or reasonably suspects that the same persons did not hold more than 50% of its units at the beginning and end of the period.
(2) For the purposes of other provisions of this Schedule, the abnormal trading occurs immediately before the end of the period.
269‑45 Time at which trustee to have knowledge or suspicion
For the purposes of section 269‑20, 269‑30 or 269‑40, the trustee must have the knowledge or reasonable suspicion mentioned in that section:
(a) if the section is being applied in determining for the purposes of section 268‑20 whether an abnormal trading occurred—at some time during the income year mentioned in that section; or
(b) if it is being applied in determining for the purposes of any other provision whether an abnormal trading occurred during a period—at some time during the period.
269‑47 Abnormal trading where holding trust
Holding trust and subsidiary trust
(1) If a unit trust has fixed entitlements directly or indirectly to all of the income and capital of another unit trust:
(a) the first trust is a holding trust of the second; and
(b) the second is a subsidiary trust of the first.
Abnormal trading causing or ending holding‑subsidiary relationship
(2) The transaction that causes a trust to become, or to cease to be, a holding trust of a subsidiary trust (the bottom subsidiary trust) is an abnormal trading in units in the bottom subsidiary trust unless:
(a) the holding trust is itself a subsidiary trust of one or more holding trusts (each of which is a higher holding trust); and
(b) immediately before and after the transaction, the bottom subsidiary trust is a subsidiary trust of one or more of the higher holding trusts.
Abnormal trading while holding‑subsidiary relationship exists
(3) While one or more trusts are holding trusts of the same subsidiary trust, there is an abnormal trading in units in the subsidiary trust if and only if, and at the time at which, there is an abnormal trading in units in the holding trust that is not itself a subsidiary trust of another holding trust.
269‑49 No abnormal trading where proportionate issue of units
If the issue of units in a unit trust to existing unit holders does not cause each unit holder’s proportion of the total fixed entitlements to shares of the income and capital of the trust to change, then, except for the purposes of section 269‑20, the issue is disregarded in determining whether there has been an abnormal trading in units in the unit trust.
Subdivision 269‑C—Passing the 50% stake test etc.
269‑50 More than a 50% stake in income or capital
More than a 50% stake in income
(1) If there are individuals who have (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of a trust, those individuals have more than a 50% stake in the income of the trust.
More than a 50% stake in capital
(2) If there are individuals who have (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the trust, those individuals have more than a 50% stake in the capital of the trust.
269‑55 Passing the 50% stake test
(1) If, at all times during a period, or at 2 times:
(a) the same individuals have more than a 50% stake in the income of a trust; and
(b) the same individuals (who may be different from those in paragraph (a)) have more than a 50% stake in the capital of the trust;
the trust passes the 50% stake test for the period or in respect of the 2 times.
(2) If a trust is a widely held unit trust it is taken to pass the 50% stake test for a period or in respect of 2 times if it is reasonable to assume that the requirements of paragraphs (1)(a) and (b) are satisfied in respect of the period or the 2 times.
Subdivision 269‑D—Pattern of distributions test
269‑60 Pattern of distributions test
A trust passes the pattern of distributions test for an income year if, before the end of 2 months after the end of the income year:
(a) the trust distributed directly or indirectly to the same individuals, for their own benefit, a greater than 50% share of all test year distributions of income (see subsection 269‑65(1)); and
(b) the trust distributed directly or indirectly to the same individuals (who may be different from those in paragraph (a)), for their own benefit, a greater than 50% share of all test year distributions of capital (see subsection 269‑65(3)).
269‑65 Test year distribution of income or capital
Test year distribution of income
(1) A test year distribution of income is the total of all distributions of income made by the trust in any of the following periods, provided the period does not begin more than 6 years before the beginning of the income year:
(a) the period from the beginning of the income year until 2 months after its end;
(b) if the trust distributed income before the trigger year (see subsection (2))—the income year, before the trigger year, that is closest to the trigger year;
(c) if paragraph (b) does not apply and the trust distributed income in the trigger year—the trigger year;
(d) if neither paragraph (b) nor paragraph (c) applies—the income year, closest to the trigger year, in which the trust distributed income;
(e) each intervening income year (if any) between the one in paragraph (a) and the one in paragraph (b), (c) or (d).
Trigger year
(2) If this Subdivision is being applied for the purposes of section 267‑20, the trigger year is the loss year mentioned in that section. If it is being applied for the purposes of section 267‑25, the trigger year is the year in which the debt mentioned in that section was incurred.
Test year distribution of capital
(3) Subsection (1) applies in the same way to distributions of capital made by the trust, to determine what is a test year distribution of capital.
269‑70 When individual receives different percentages
For the purposes of section 269‑60, if the trust does not distribute to an individual the same percentage of income or capital for every test year distribution, the trust is taken to have distributed to the individual, for every test year distribution, the smallest percentage that it distributed to the individual for any of the test year distributions.
269‑75 Incomplete distributions
For the purposes of section 269‑60, if, before the end of 2 months after the end of the income year:
(a) the trust has distributed directly or indirectly the whole or part of a test year distribution of income or test year distribution of capital to a company, partnership or trust (the entity); and
(b) an amount (the undistributed amount) consisting of the whole or part of the income or capital so distributed to the entity satisfies the following requirements:
(i) the amount has not been distributed by the entity; and
(ii) an individual, directly or indirectly, and for his or her own benefit, has a fixed entitlement to a share of the amount;
the entity is taken to have distributed the share of the undistributed amount to the individual immediately before the end of 2 months after the end of the income year.
269‑80 Where individual’s death or breakdown of marriage or relationship
(1) For the purposes of section 269‑60, if:
(a) the trust distributes, directly or indirectly to an individual as mentioned in that section, income or capital that is included in a test year distribution; and
(b) a later distribution of income or capital is made that is included in the same or a different test year distribution; and
(c) either the individual dies before the later distribution is made or:
(i) before it is made, there is a breakdown in the marriage or relationship (see section 272‑140) of the individual; and