Broad overview of the trust loss measures

The control test - Subdivision 269-E of Schedule 2F to the ITAA 1936

The control test applies to non-fixed trusts. Where a group begins to control a trust between the beginning of the loss year and the end of the recoupment year, the tax loss of the trust cannot be deducted.

A group is defined at subsection 269-95(5) of Schedule 2F to the ITAA 1936 as a person, a person and one or more associates or two or more associates of a person. Associate is defined in section 318 of the ITAA 1936.

Subsection 269-95(1) of Schedule 2F to the ITAA 1936 defines when a group controls a non-fixed trust. Control includes the group being able to remove or appoint the trustee, influence or direct the trustee, control the application of the income and capital of the trust, obtain beneficial enjoyment of the income or capital of the trust or acquire more than 50% stake in the income or capital of the trust.

Whether a group begins to control a trust in the test period is a question of fact, depending on the circumstances of each individual trust - particularly taking into account the powers provided under the trust deed.

The following factors should be checked when determining whether there has been a change in the group controlling the trust in the test period:

changes in trustee/s
changes in the appointor or guardian
changes in the shareholders/directors of the corporate trustee
the appointment of new beneficiaries
the amendment of the trust deed
a change in unit holdings
other unusual changes.

Some of these changes could also result in the creation of a new trust -see Creation of a new trust - Statement of Principles August 2001 (commonly referred to as the trust resettlement principles) issued by the Commissioner in August 2001.

Sections within The control test - Subdivision 269-E of Schedule 2F to the ITAA 1936

Last Modified: Tuesday, 19 January 2010