Advanced guide to capital gains tax concessions for small business 2009-10

No distributions made

The trustee of a discretionary trust may nominate up to four beneficiaries as being controllers of the trust for an income year in which the trust had a tax loss or no taxable income and in which the trustee did not pay or apply any income or capital of the trust.

In such a case, the trust might not have had the funds to make a distribution, which would prevent it from being controlled in that year. The trustee may wish to make the nomination to ensure that a particular CGT asset is treated as an active asset for that year.

The nomination must be in writing and signed by the trustee and each nominated beneficiary.

Effect of nominating a beneficiary as controller of the trust

From the 2007-08 year a beneficiary nominated as controller of a trust is connected with the trust for the purposes of the active asset test only. Neither the beneficiary nor the trust need to include the CGT assets or turnover of the other in the calculation of the maximum net asset value test or aggregated turnover test.

For 2006-07 and prior years a nominated controller was connected with the trust for the purposes of the maximum net asset value test.

Sections within When an entity is connected with you

• Connected with - control of a partnership, company or trust (except a discretionary trust)
• Connected with - control of a discretionary trust
• No distributions made
• Connected with - indirect control of an entity