(ii) after the breakdown, no distribution of income or capital of the trust, that is included in a test year distribution, is made directly or indirectly to the individual; and
(iii) it is reasonable to assume that the breakdown in the marriage or relationship is the reason for no such distribution being made;
then subsections (2) and (3) apply.
(2) No income or capital distributed to the individual by the trust, directly or indirectly as mentioned in section 269‑60, is to be included in any test year distribution.
(3) If:
(a) the requirements of subsection (1) are met because the individual has died; and
(b) immediately before his or her death, the individual had directly or indirectly, and for his or her own benefit, a fixed entitlement to a share of the income or capital of the trust; and
(c) after the individual’s death, the fixed entitlement is held by a person as trustee of the individual’s estate or by a person who received it as a beneficiary of the estate;
no income or capital distributed to the person as such a trustee or beneficiary, directly or indirectly as mentioned in section 269‑60, is to be included in any test year distribution.
269‑85 Arrangements to pass pattern of distributions test
(1) The trust is taken for the purposes of section 269‑60 not to have distributed, directly or indirectly to an individual, and for the individual’s own benefit, a share of a test year distribution of income or capital of the trust if the condition in subsection (2) is met.
(2) The condition is that an arrangement was entered into where:
(a) the arrangement in some way (directly or indirectly) related to, affected or depended for its operation on the share or its value; and
(b) the purpose, or one of the purposes, of the arrangement was to ensure that the trust would meet the condition in subsection 267‑30(2).
Subdivision 269‑E—Control a non‑fixed trust
269‑95 Control a non‑fixed trust
Basic meaning
(1) Subject to this section, a group (see subsection (5)) controls a non‑fixed trust if:
(a) the group has the power, by means of the exercise of a power of appointment or revocation or otherwise, to obtain beneficial enjoyment (directly or indirectly) of the capital or income of the trust; or
(b) the group is able (directly or indirectly) to control the application of the capital or income of the trust; or
(c) the group is capable, under a scheme, of gaining the beneficial enjoyment in paragraph (a) or the control in paragraph (b); or
(d) the trustee is accustomed, under an obligation or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the group; or
(e) the group is able to remove or appoint the trustee; or
(f) the group acquires more than a 50% stake in the income or capital of the trust.
Replacement group after death etc.
(2) The consequences set out in subsection (3) apply if:
(a) a group (the original group) ceases to control a non‑fixed trust only because of the death, incapacitation or breakdown in the marriage or relationship of the individual comprising, or an individual included in, the group; and
(b) another group (the replacement group) begins to control the trust within the following period (whether or not any other group controlled the trust in the interim):
(i) one year after the death, incapacitation or breakdown in the marriage or relationship; or
(ii) such longer period as the Commissioner determines in relation to the death, incapacitation or breakdown in the marriage or relationship; and
(c) the replacement group consists of:
(i) if the individual who died or became incapacitated or whose marriage or relationship broke down comprised the original group—one or more individuals who are members of the individual’s family (see section 272‑95); or
(ii) in any other case—one or more such individuals together with all of the persons who were members of the original group, other than any individual who has died or become incapacitated or whose marriage or relationship has broken down; and
(d) the replacement group began to control the trust only because of the death, incapacitation or breakdown in the marriage or relationship of the individual; and
(e) disregarding any individual who died or became incapacitated or whose marriage or relationship broke down and the one or more individuals covered by paragraph (c)—the beneficiaries of the trust immediately before the original group ceased to control the trust are the beneficiaries of the trust immediately after the replacement group begins to control the trust.
Consequences of subsection (2)
(3) For the purposes of subsection (2), the consequences are that:
(a) the replacement group is taken to have controlled the trust from the time when the original group began to control it until the time when the replacement group actually began to control it; and
(b) the original group is taken not to have controlled the trust; and
(c) if:
(i) a person or persons (other than a replacement group) began to control the trust at some time during the period from the time the original group ceased to control the trust until the replacement group began to do so; and
(ii) the person or persons began to control the trust only because of the death, incapacitation or breakdown in the marriage or relationship of the individual; and
(iii) the control did not continue after the replacement group began to control the trust;
the person or persons are taken not to have controlled the trust.
Deemed absence of control
(4) If:
(a) at a particular time, a group controls a non‑fixed trust; and
(b) the Commissioner, having regard to:
(i) the identity of the beneficiaries of the trust at any time before and at any time after the group began to control the trust; and
(ii) all other relevant circumstances;
considers that it is reasonable that the group be taken not to control the trust at the particular time;
the group is taken not to control the trust at the particular time.
Group
(5) A group is:
(a) a person; or
(b) a person and one or more associates; or
(c) 2 or more associates of a person.
Subdivision 269‑F—Business continuity test
269‑100 Passing the business continuity test
Basic meaning
(1) A listed widely held trust passes the business continuity test during a period (the business continuity test period) in relation to a time (the test time) if throughout the business continuity test period it carries on the same business as it carried on immediately before the test time.
Relevance of being a trust
(2) The mere fact of being a trust does not mean that the trust cannot carry on a business.
First exception
(3) However, the trust does not pass the business continuity test under this section if, at any time during the business continuity test period, it derives assessable income from:
(a) a business of a kind that it did not carry on before the test time; or
(b) a transaction of a kind that it had not entered into in the course of its business operations before the test time.
Second exception
(4) The trust also does not pass the business continuity test under this section if, before the test time, it:
(a) began to carry on a business it had not previously carried on; or
(b) in the course of its business operations, entered into a transaction of a kind that it had not previously entered into;
and did so for the purpose, or for purposes including the purpose, of being taken to have carried on throughout the business continuity test period the same business as it carried on immediately before the test time.
Third exception
(5) So far as the test is applied for the purpose of section 266‑115 (Listed widely held trust may be required to work out its net income and tax loss in a special way) and section 268‑20 (Widely held unit trust’s income year to be divided into periods), the trust also does not pass the business continuity test under this section if, at any time during the business continuity test period, it incurs expenditure:
(a) in carrying on a business of a kind that it did not carry on before the test time; or
(b) as a result of a transaction of a kind that it had not entered into in the course of its business operations before the test time.
269‑105 Modified test for income years starting on or after 1 July 2015
Cases in which businesses need only be similar
(1) A listed widely held trust also passes the business continuity test during a period (the business continuity test period) in relation to a time (the test time) and in relation to:
(a) a tax loss for a loss year starting on or after 1 July 2015; or
(b) net income for an income year starting on or after 1 July 2015; or
(c) a debt, incurred in an income year starting on or after 1 July 2015, that the trust writes off as bad; or
(d) a debt, incurred in an income year starting on or after 1 July 2015, in relation to which a debt/equity swap (within the meaning of section 63E) occurs;
if throughout the business continuity test period it carries on a business (its current business) that is similar to the business it carried on immediately before the test time (its former business).
Relevance of being a trust
(2) The mere fact of being a trust does not mean that the trust cannot carry on a business.
Matters to be considered
(3) Without limiting the matters that may be taken into account in ascertaining whether the trust’s current business is similar to its former business, the following must be taken into account:
(a) the extent to which the assets (including goodwill) that are used in its current business to generate assessable income throughout the business continuity test period were also used in its former business to generate assessable income;
(b) the extent to which the activities and operations from which its current business generated assessable income throughout the business continuity test period were also the activities and operations from which its former business generated assessable income;
(c) the identity of its current business and the identity of its former business;
(d) the extent to which any changes to its former business result from development or commercialisation of assets, products, processes, services or marketing or organisational methods of the former business.
Exception
(4) However, the trust does not pass the business continuity test under this section if, before the test time, it:
(a) began to carry on a business it had not previously carried on; or
(b) in the course of its business operations, entered into a transaction of a kind that it had not previously entered into;
and did so for the purpose, or for purposes including the purpose, of being taken to have carried on throughout the business continuity test period a business that is similar to the business it carried on immediately before the test time.
Division 270—Schemes to take advantage of deductions
270‑5 What this Division is about
A trust may be prevented from making any use of deductions, or full use of deductions in an income year, if a scheme to take advantage of the deductions exists.
270‑10 Schemes to take advantage of deductions
Basic case
(1) The consequences set out in section 270‑15 result if:
(a) a deduction is allowable to a trust for the income year; and
(b) under a scheme, the following happen (in any order):
(i) the trust derives an amount of assessable income (the scheme assessable income) in the income year; and
(ii) an outsider to the trust (see section 270‑25) directly or indirectly provides a benefit (see section 270‑20) to the trustee, to a beneficiary in the trust or to an associate of the trustee or of a beneficiary; and
Note: The benefit may constitute all or any of the scheme assessable income.
(iii) the trustee, a beneficiary in the trust or an associate of the trustee or of a beneficiary, directly or indirectly provides a benefit to the outsider to the trust or to an associate of the outsider (other than an associate covered by any of paragraphs 270‑25(1)(a) to (f)); and
Note: The benefit may constitute all or any of the deduction.
(c) it is reasonable to conclude that:
(i) the trust derived the scheme assessable income; or
(ii) the outsider provided the benefit as mentioned in subparagraph (b)(ii); or
(iii) the trustee, beneficiary or associate provided the benefit as mentioned in subparagraph (b)(iii);
wholly or partly, but not merely incidentally, because the deduction would be allowable; and
(d) the trust is not an excepted trust under paragraph 272‑100(b), (c) or (d).
Special case
(2) If:
(a) under a scheme, a person who, before the scheme was entered into, was an outsider to a trust becomes:
(i) the trustee of the trust; or
(ii) a person with a fixed entitlement to a share of the income or capital of the trust; and
(b) if the person had not ceased to be an outsider to the trust, the requirements of subsection (1) would have been satisfied in relation to the scheme;
the requirements of subsection (1) are taken to have been satisfied in relation to the scheme.
270‑15 Tax consequences of schemes
If the requirements of subsection 270‑10(1) are satisfied, the consequences are that:
(a) to the extent (if any) that the deduction mentioned in paragraph 270‑10(1)(a) relates exclusively, or may appropriately be related, to the scheme assessable income, the deduction is not allowable; and
(b) if the net income of the trust is less than the scheme assessable income or there is no net income—the trust has a net income equal to, or the net income is increased so that it equals, the scheme assessable income; and
(c) paragraph (b) and the scheme assessable income are disregarded in working out any tax loss incurred by the trust in the income year; and
(d) if paragraph (b) applies and the deduction mentioned in paragraph 270‑10(1)(a) is for a tax loss—paragraph (b) and the scheme assessable income are disregarded in working out any deduction in respect of the tax loss allowable after the income year.
270‑20 Benefit
A benefit is:
(a) money, a dividend or property (whether tangible or intangible); or
(b) a right or entitlement (whether or not property); or
(c) services; or
(d) the extinguishment, forgiveness, release or waiver of a debt or other liability; or
(e) the doing of anything that results in the derivation of assessable income; or
(f) anything that, disregarding the preceding paragraphs, is a benefit or advantage.
270‑25 Outsider to trust
Outsider to family trust
(1) If the trust mentioned in paragraph 270‑10(1)(a) is a family trust, an outsider to the trust is a person other than:
(a) the trustee of the trust; or
(b) a person with a fixed entitlement to a share of the income or capital of the trust; or
(c) the individual specified in the trust’s family trust election; or
(d) a member of the individual’s family; or
(da) a trust with the same individual specified in its family trust election; or
(e) a company, partnership or trust that made an interposed entity election to be included in the individual’s family group, where the election was in force (including before it was made) when the scheme mentioned in paragraph 270‑10(1)(b) commenced; or
(f) a fixed trust, company or partnership (an entity) where, at all times while the scheme mentioned in paragraph 270‑10(1)(b) was being carried out:
(i) the individual specified in the trust’s family trust election; or
(ii) one or more members of the individual’s family; or
(iii) the trustees of one or more family trusts, provided the individual is specified in the family trust election of each of those family trusts;
or any combination of the above, had fixed entitlements, directly or indirectly, and for their own benefit, to all of the income and capital of the entity.
Outsider to non‑family trust
(2) If the trust mentioned in paragraph 270‑10(1)(a) is not a family trust, an outsider to the trust is a person other than:
(a) the trustee of the trust; or
(b) a person with a fixed entitlement to a share of the income or capital of the trust.
Division 271—Family trust distribution tax
271‑5 What this Division is about
Basically, if:
• the trustee of a trust makes a family trust election; or
• a company, the partners in a partnership or the trustee of a trust makes an election to be included in a family group in relation to a family trust;
and the company, partnership or trust concerned confers a present entitlement to, or distributes, income or capital other than upon or to a specified individual or members of his or her family group, a special tax is payable on the conferral or distribution.
If certain persons do not provide information about conferrals of present entitlements or distributions by non‑residents connected with them, the persons may become liable to the special tax on their own conferrals or distributions.
If certain non‑residents do not pay the special tax by the due date, other persons connected with them may also become liable to pay a special tax equal to the unpaid amount.
271‑10 Family trust distribution tax
This Division provides for tax to be payable in specified circumstances. The tax is called family trust distribution tax.
271‑15 Tax liability where family trust makes distribution etc. outside family group
(1) This section applies if:
(a) a trustee makes a family trust election in relation to a trust; and
(b) at any time while the election is in force (including a time before it was made), the trust confers a present entitlement to, or distributes, income or capital of the trust:
(i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual’s family group in relation to the conferral or distribution; or