Broad overview of the trust loss measures

Types of trusts

The trust loss measures apply to two broad categories of trusts - fixed trusts and non-fixed trusts. A non-fixed trust is any trust that is not a fixed trust, as per section 272-70 of Schedule 2F to the ITAA 1936. Thus, a non-fixed trust can include a large range of trusts, from those that are purely discretionary to those that are fixed but where some or all of the entitlements in the trust are defeasible. Trusts that have both fixed and non-fixed elements (hybrid trusts) are also non-fixed trusts for the purposes of the legislation.

There are different kinds of fixed trust. They are the following:

• ordinary fixed trusts
• widely held unit trusts. There are several kinds of widely held unit trusts - unlisted widely held trusts, listed widely held trusts, unlisted very widely held trusts and wholesale widely held trusts
• excepted trusts. Excepted trusts include family trusts, some superannuation funds, deceased estates within a five year administration period, and unit trusts with unit holders that are exempt from income tax.

A family trust is a trust where the trustee of the trust has made a family trust election in accordance with section 272-80 of Schedule 2F to the ITAA 1936 and, if applicable, items 22 or 22A of Schedule 1 to the Taxation Laws Amendment (Trust Loss and Other Deductions) Act 1998.

Summary of tests that apply

The following table summarises the tests that apply to each type of trust.

Type of trust	50% stake test	Same business test	Pattern of distributions test	Control test	Income injection test
Fixed trust other than a widely held unit trust	(1)
Unlisted widely held trust
Listed widely held trust		(2)
Unlisted very widely held trust
Wholesale widely held trust
Non-fixed trust	*		(3)
Family trust					(4)
Excepted trust (other than a family trust)

(1)   An alternate test is also available in certain cases where non-fixed trusts hold fixed entitlements in the fixed trust.

(2)   This test can be applied if the 50% stake test is failed by a listed widely held trust.

(3)   This test does not apply for current-year loss purposes.

(4)   The income injection test does not apply where entities and individuals within a family group inject income into a family trust with losses (see below).