Broad overview of the trust loss measures

The 50% stake test - alternative test

The alternative test of the 50% stake test applies where the majority of fixed entitlements in the trust are held by a non-fixed trust in which there are no fixed entitlements. In this situation, the 50% stake test cannot be satisfied by the trust and an alternative 50% stake test is applied to determine if the trust satisfies the 50% stake test.

The alternative 50% stake test applies to ordinary fixed trusts where a non-fixed trust(s) holds an interest in a fixed trust under the following circumstances:

• non-fixed trusts (other than family trusts) hold fixed entitlements to 50% or more of the income or capital of the fixed trust
• non-fixed trusts (other than family trusts) hold fixed entitlements to 50% or more of the income or capital of a company or a fixed trust (the holding entity) which holds all of the fixed entitlements to income and capital of the fixed trust.

These fixed entitlements must have been held continuously during the test period.

The alternative 50% stake test is passed if:

• interests in the fixed trust are held directly by non-fixed trusts and there are no changes in the persons directly holding fixed entitlements to the income or capital of the fixed trust or the percentage of their interests
• where interests in the fixed trust are held, directly or indirectly, by a holding entity, there must be no changes in the persons directly holding fixed entitlements to the income or capital of the holding entity
• every non-fixed trust (that is not a family trust or other excepted trust) that holds fixed entitlements in the fixed trust, directly or indirectly, must satisfy the relevant tests that apply to non-fixed trusts as if they stood in place of the loss trust.

Sections within The 50% stake test - alternative test

• Example 7: 50% alternative stake test