Broad overview of the trust loss measures

When does the income injection test apply?

The income injection test will apply where an 'outsider' to the loss trust seeks to take advantage of the deduction(s). In general terms, the outsider must provide a benefit to the trust and a return benefit must be given to the outsider. Also, either of the benefits (or the income injected under the scheme), must have been provided or derived wholly or partly, but not merely incidentally, because of the deduction(s).

The income injection test does not apply to income injection schemes that take place wholly within a family group. It also does not apply to complying superannuation funds, complying approved deposit funds, pooled superannuation trusts, fixed unit trusts where all direct or indirect unit holders are exempt from income tax, and deceased estates within a reasonable administration period.

The income injection test applies to all trusts, including excepted trusts.

Sections within Income injection schemes

• When does the income injection test apply?
• Terms used in the income injection test
• What are the elements of the income injection test?
• What are the consequences if the test is failed?
• Examples of how the income injection test may apply