The document provides an overview of trust losses and family trust elections in Australia. It discusses the historical context of tax losses and how legislation has made it more difficult to trade losses. It then summarizes the key tests for applying trust losses, including the fixed vs non-fixed trust tests, pattern of distributions test, control test, and 50% stake test. The document also outlines the benefits of family trust elections, such as being able to apply current and prior year losses. It discusses the test individual, family group, interposed entity elections, and restrictions on revoking a family trust election.
grape is very important fruit crop and quality of its improved through various techniques like using various plant growth regulators e.g. gibberellic acid improve the size of berry, etc
The document describes the carambola tree, including its botanical description, origin in Southeast Asia, cultivation practices, pests and diseases, propagation methods, and popular clones. It notes that the carambola is a slow-growing tropical tree that produces distinctive star-shaped yellow fruits and can tolerate some freezing temperatures. Proper care including fertilization, irrigation, and management of pests like fruit flies is needed for optimal growth and yields.
Presenter: M. Anjugam, S. Varadha Raj, and S. Padmarani
Audience: 3rd National SRI Symposium,
TNAU, Coimbatore, India
Subject Country: Tamil Nadu, India
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive function. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
The document provides information about a seminar on water management in agriculture given by Garima Bhickta. It discusses various topics related to water management including terminology, water requirements of crops, irrigation scheduling tools and methods, rainwater harvesting, and drip irrigation. Specifically, it summarizes different methods of irrigation like surface, sprinkler and drip irrigation. It also provides data on increased yields from various crops with drip irrigation compared to conventional irrigation methods and higher water use efficiency.
2020 Netwealth Roadshow - Next super steps with Keat Chew, Netwealth Head of ...netwealthInvest
With more than three decades of super asset growth behind us, Netwealth's Head of Technical Services, Keat Chew, presented four strategies that can be used to elevate superannuation advice in 2020 and beyond.
grape is very important fruit crop and quality of its improved through various techniques like using various plant growth regulators e.g. gibberellic acid improve the size of berry, etc
The document describes the carambola tree, including its botanical description, origin in Southeast Asia, cultivation practices, pests and diseases, propagation methods, and popular clones. It notes that the carambola is a slow-growing tropical tree that produces distinctive star-shaped yellow fruits and can tolerate some freezing temperatures. Proper care including fertilization, irrigation, and management of pests like fruit flies is needed for optimal growth and yields.
Presenter: M. Anjugam, S. Varadha Raj, and S. Padmarani
Audience: 3rd National SRI Symposium,
TNAU, Coimbatore, India
Subject Country: Tamil Nadu, India
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive function. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
The document provides information about a seminar on water management in agriculture given by Garima Bhickta. It discusses various topics related to water management including terminology, water requirements of crops, irrigation scheduling tools and methods, rainwater harvesting, and drip irrigation. Specifically, it summarizes different methods of irrigation like surface, sprinkler and drip irrigation. It also provides data on increased yields from various crops with drip irrigation compared to conventional irrigation methods and higher water use efficiency.
2020 Netwealth Roadshow - Next super steps with Keat Chew, Netwealth Head of ...netwealthInvest
With more than three decades of super asset growth behind us, Netwealth's Head of Technical Services, Keat Chew, presented four strategies that can be used to elevate superannuation advice in 2020 and beyond.
What You Need to Know about the Patient Protection & Affordable Care Act (Upd...Jackson White, P.C.
The document discusses key provisions of the Affordable Care Act that employers need to be aware of, including extended coverage standards, non-discrimination standards, and shared responsibility standards. It explains that employers with 50 or more full-time employees that do not offer affordable, minimum essential coverage will face penalties, while individuals without coverage may be assessed a penalty. The document provides details on ACA compliance requirements and outlines opportunities for employers to assess their compliance obligations.
This document discusses creating a retirement income and investment strategy. It emphasizes the importance of planning before investing and outlines 4 steps to constructing a personalized strategy: 1) Estimate retirement expenses, 2) Identify sources of retirement income, 3) Determine tolerance for income variance, and 4) Construct the strategy with a financial professional. A case study example is provided to illustrate how these steps are applied for a hypothetical retiree. The key is to have guaranteed income sources cover essential needs and to work with an advisor to develop a customized plan.
This document discusses dividend policy and theories related to dividends. It begins by explaining the concept of ploughing back profits or retaining earnings for reinvestment purposes. It then discusses different forms of dividends and factors that affect dividend policy decisions. Several theories of dividends are presented, including the irrelevance approach of Miller and Modigliani, the residual theory, Walter's model, and Gordon's model. The document provides illustrations and discusses management views on maintaining consistent dividends.
Tax on Split Income: How Do the New Rules Impact You?Welch LLP
The document summarizes key aspects of the new Tax on Split Income (TOSI) regime in Canada. It discusses how the new rules impact income splitting compared to the old regime, provides an overview of the TOSI assessment and definitions of specified individuals and related businesses. It also examines exclusions like excluded amounts, excluded businesses, excluded shares and reasonable returns. Examples are provided to illustrate how TOSI applies in different scenarios involving private corporations and family income splitting. The webinar panelists then invite questions from attendees.
What You Need to Know About the Patient Protection & Affordable Health Care ActJackson White, P.C.
The document provides information about key provisions of the Patient Protection and Affordable Care Act (PPACA) as it relates to employer shared responsibility requirements. It discusses who is considered a full-time employee and the penalties employers may face if they do not offer affordable health insurance or if employees receive subsidies. It also outlines standards for minimum essential coverage and considerations for determining if a plan is discriminatory. Employers with 50 or more full-time employees that do not provide affordable, minimum value coverage could pay penalties of up to $3,000 per employee receiving subsidies.
The document discusses key provisions of the Affordable Care Act. It summarizes that the Act expands health insurance coverage through an individual mandate requiring most people to have minimum essential coverage or pay a penalty. It also requires large employers to offer affordable coverage to full-time employees or pay penalties. Additionally, the Act increases Medicare taxes on high-income individuals.
This document summarizes a presentation on the proposed Current Expected Credit Loss (CECL) model for calculating loan loss allowances. The presentation discusses how CECL differs from the existing incurred loss model by requiring lifetime loss estimates and consideration of forecasts. It notes CECL will likely increase allowances and their volatility. Operational challenges include developing life-of-loan loss data and forecasting economic conditions. Preparers are concerned about capital impacts while investors prefer CECL's timely loss recognition. Internal controls will need to adapt to CECL's increased complexity, subjectivity and regulatory scrutiny.
The Tax Diversify Your Retirement Income with Life Insurance sales presentation will help you understand the importance of tax diversification and the benefits that a Custom Whole Life (CWL) policy can provide. In addition to the traditional benefit of death benefit protection, the cash value of the CWL policy accumulates tax-deferred and can generally be accessed on a tax-free basis*.
Use the concept presentation and other materials to discuss how life insurance not only provides death benefit protection, but can also be a tax diversification tool.
Contact me if you would like to discuss
*The cash value is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals. Loans and withdrawals will decrease the total death benefit and total cash value. The supplemental retirement income is not guaranteed.
This document discusses dividend policy decisions and the MM approach. It begins by defining dividends and discussing sources and types of dividends. It then discusses what a dividend policy is and the key determinants of dividend policy such as legal restrictions, earnings trends, and shareholder preferences. The document also summarizes the irrelevance concept of dividends proposed by Modigliani and Miller, which states that dividend policy does not impact firm value under certain assumptions. It provides the formulas used in the MM approach to model how dividend payments do not affect share prices.
The document discusses different models and theories of dividend policy, including:
- Walter's theory, which uses a mathematical model to show that a company's dividend policy impacts its valuation. The model relates market price to factors like dividend payout, internal rate of return, and cost of capital.
- Gordon's theory, another mathematical model that explicitly links market value to dividend policy. It determines value based on perpetual dividends, cost of capital, and growth rate.
- Modigliani-Miller theory, which argues that dividends are "irrelevant" for valuation as investors will value companies based on earnings and investment policy rather than dividend history. Dividends and capital gains are considered equivalent sources of
Some of the major different theories of dividend in financial management are as follows: 1. Walter’s model 2. Gordon’s model 3. Modigliani and Miller’s hypothesis.
On the relationship between dividend and the value of the firm different theories have been advanced.
The document discusses different models and theories of dividend policy, including:
- Walter's theory, which uses a mathematical model to show that a company's dividend policy impacts its valuation. The model relates market price to factors like dividend payout, internal rate of return, and cost of capital.
- Gordon's theory, another mathematical model that explicitly links market value to dividend policy. It determines value based on perpetual dividends, cost of capital, and growth rate.
- Modigliani-Miller theory, which argues that dividends are "irrelevant" for valuation as investors will value a company based on its investment policy and earnings, not its dividend history. Dividends and capital gains are considered
This document discusses fixed index annuities as a retirement planning strategy. It notes that fixed index annuities offer guarantees of principal, tax deferral, flexibility, access to funds, and a lifetime income stream. They allow interest to be credited based on the growth of a chosen market index while protecting the principal. Fixed index annuities also guarantee income for life and can help address concerns about outliving one's savings.
Dividend decision in financial management and decision makingshrutisingh143670
The document discusses factors to consider when determining a company's dividend policy. It explains that a dividend policy involves deciding how much of profits to distribute as dividends versus retaining earnings. The dividend payout ratio, stability of dividends, liquidity, growth plans, and control are important factors to consider. An effective policy balances paying dividends to investors with retaining enough earnings to finance future growth opportunities.
Retirement planning is a constantly changing subject. John Friar, AIF, of HJB Financial walks employers through the new landscape of retirement planning.
Understanding the Affordable Care Act: Should You Pay or Play?EPAY Systems
The Affordable Care Act (ObamaCare) is upon us and there’s a lot to do in order to be ready for the employer mandate coming in Jan 2015. It starts with determining if you should pay or play. Jennifer Kraft, gives us an update of where healthcare reform stands now and how to calculate your real cost. She’ll also cover: what steps should you be taking right now to determine whether you should pay or play; how can you ensure that you’re minimizing the financial impact of the ACA on your business?
Jennifer Kraft of Seyfarth Shaw LLP, will review this pay or play mandate and ways employers can mitigate the financial impact, including:
◾Are you even subject to the Affordable Care Act and if you are, what are your options? Which employees must you offer coverage to or pay a penalty? What are the state exchanges and how do they work with the employer mandate?
◾How is the employer penalty calculated?
◾How will the expansion of eligibility for Medicaid in your state affect the employer penalty? How do you discover whether your state’s ruling will impact your employees and who you will need to provide insurance to?
◾If your employee hours vary (i.e., part-time and fluctuating schedule workers in industries such as retail, hospitality, and health care), how do you calculate your ACA liabilities?
◾What steps should you be taking right now to determine whether you should pay or play? How can you ensure that you’re minimizing the financial impact of the ACA on your business?
In addition, EPAY will briefly discuss how a time and labor management system can help you monitor and track the data required to make these decisions and manage the ACA on an ongoing basis. Automated tools from your time-tracking system, such as reports and alerts, will be critical to managing who is eligible and mitigating the risk of non-compliance. For more than 60 years, Seyfarth Shaw has been recognized as one of the “go-to” labor and employment firms for business by providing extraordinary, cost-effective results. EPAY Systems, Inc. has joined forces with Seyfarth Shaw to educate employers of distributed labor environments on how compliance risk can be minimized
.
The document discusses Family Investment Companies (FICs), which are private companies used as an alternative to family trusts. Key features of FICs include shareholders being family members and enabling parents to retain control over assets in a tax efficient manner. Typical structures involve parents providing funds through interest-free loans or preference shares and retaining voting shares. FICs allow profits to accumulate and be distributed to family members in a tax efficient way. However, future changes to taxation of retained profits could impact the benefits of FICs. Planning is needed to ensure FICs continue to provide estate planning benefits for families.
This document provides information on salaries, case studies, and spending priorities for OSMA Investment Program participants. It notes that desirable locations like Dallas or Austin offer starting salaries in the low $200k range, while OUHSC starts around $250k and private groups pay mid to high $300k. A case study outlines debts totaling $200k in school loans, $240k mortgage, $25k car loan, and $25k credit cards against a $375k salary. It recommends paying off highest interest debt first, consolidating if possible, and saving at least 10% of income across IRAs, education accounts, and emergency funds.
Business Law & Order - January 20, 2014 - Tax PlanningAnnArborSPARK
The document provides an overview and summary of a presentation on tax planning related to equity incentive strategies, valuation methodologies, challenges in valuing early stage companies, and the net investment income tax. It discusses share-based payment awards, considerations in selecting valuation models, difficulties in valuing startups, and details of the additional 3.8% tax on net investment income over certain thresholds. Examples are also given to illustrate how the net investment income tax applies in different scenarios.
This document introduces the concept of private third party pension sponsorship as a way to address issues in the UK pension industry. It notes that current industry approaches are failing to solve the widening savings gap or rebuild consumer confidence and trust. A new, innovative, consumer-focused approach is needed that provides extra funding, education, and flexibility while reducing risks. Private third party pension sponsorship could potentially improve financial outcomes for savers, tackle consumer negativity, and help address employer budget constraints by shifting some liability to the private sector.
What You Need to Know about the Patient Protection & Affordable Care Act (Upd...Jackson White, P.C.
The document discusses key provisions of the Affordable Care Act that employers need to be aware of, including extended coverage standards, non-discrimination standards, and shared responsibility standards. It explains that employers with 50 or more full-time employees that do not offer affordable, minimum essential coverage will face penalties, while individuals without coverage may be assessed a penalty. The document provides details on ACA compliance requirements and outlines opportunities for employers to assess their compliance obligations.
This document discusses creating a retirement income and investment strategy. It emphasizes the importance of planning before investing and outlines 4 steps to constructing a personalized strategy: 1) Estimate retirement expenses, 2) Identify sources of retirement income, 3) Determine tolerance for income variance, and 4) Construct the strategy with a financial professional. A case study example is provided to illustrate how these steps are applied for a hypothetical retiree. The key is to have guaranteed income sources cover essential needs and to work with an advisor to develop a customized plan.
This document discusses dividend policy and theories related to dividends. It begins by explaining the concept of ploughing back profits or retaining earnings for reinvestment purposes. It then discusses different forms of dividends and factors that affect dividend policy decisions. Several theories of dividends are presented, including the irrelevance approach of Miller and Modigliani, the residual theory, Walter's model, and Gordon's model. The document provides illustrations and discusses management views on maintaining consistent dividends.
Tax on Split Income: How Do the New Rules Impact You?Welch LLP
The document summarizes key aspects of the new Tax on Split Income (TOSI) regime in Canada. It discusses how the new rules impact income splitting compared to the old regime, provides an overview of the TOSI assessment and definitions of specified individuals and related businesses. It also examines exclusions like excluded amounts, excluded businesses, excluded shares and reasonable returns. Examples are provided to illustrate how TOSI applies in different scenarios involving private corporations and family income splitting. The webinar panelists then invite questions from attendees.
What You Need to Know About the Patient Protection & Affordable Health Care ActJackson White, P.C.
The document provides information about key provisions of the Patient Protection and Affordable Care Act (PPACA) as it relates to employer shared responsibility requirements. It discusses who is considered a full-time employee and the penalties employers may face if they do not offer affordable health insurance or if employees receive subsidies. It also outlines standards for minimum essential coverage and considerations for determining if a plan is discriminatory. Employers with 50 or more full-time employees that do not provide affordable, minimum value coverage could pay penalties of up to $3,000 per employee receiving subsidies.
The document discusses key provisions of the Affordable Care Act. It summarizes that the Act expands health insurance coverage through an individual mandate requiring most people to have minimum essential coverage or pay a penalty. It also requires large employers to offer affordable coverage to full-time employees or pay penalties. Additionally, the Act increases Medicare taxes on high-income individuals.
This document summarizes a presentation on the proposed Current Expected Credit Loss (CECL) model for calculating loan loss allowances. The presentation discusses how CECL differs from the existing incurred loss model by requiring lifetime loss estimates and consideration of forecasts. It notes CECL will likely increase allowances and their volatility. Operational challenges include developing life-of-loan loss data and forecasting economic conditions. Preparers are concerned about capital impacts while investors prefer CECL's timely loss recognition. Internal controls will need to adapt to CECL's increased complexity, subjectivity and regulatory scrutiny.
The Tax Diversify Your Retirement Income with Life Insurance sales presentation will help you understand the importance of tax diversification and the benefits that a Custom Whole Life (CWL) policy can provide. In addition to the traditional benefit of death benefit protection, the cash value of the CWL policy accumulates tax-deferred and can generally be accessed on a tax-free basis*.
Use the concept presentation and other materials to discuss how life insurance not only provides death benefit protection, but can also be a tax diversification tool.
Contact me if you would like to discuss
*The cash value is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals. Loans and withdrawals will decrease the total death benefit and total cash value. The supplemental retirement income is not guaranteed.
This document discusses dividend policy decisions and the MM approach. It begins by defining dividends and discussing sources and types of dividends. It then discusses what a dividend policy is and the key determinants of dividend policy such as legal restrictions, earnings trends, and shareholder preferences. The document also summarizes the irrelevance concept of dividends proposed by Modigliani and Miller, which states that dividend policy does not impact firm value under certain assumptions. It provides the formulas used in the MM approach to model how dividend payments do not affect share prices.
The document discusses different models and theories of dividend policy, including:
- Walter's theory, which uses a mathematical model to show that a company's dividend policy impacts its valuation. The model relates market price to factors like dividend payout, internal rate of return, and cost of capital.
- Gordon's theory, another mathematical model that explicitly links market value to dividend policy. It determines value based on perpetual dividends, cost of capital, and growth rate.
- Modigliani-Miller theory, which argues that dividends are "irrelevant" for valuation as investors will value companies based on earnings and investment policy rather than dividend history. Dividends and capital gains are considered equivalent sources of
Some of the major different theories of dividend in financial management are as follows: 1. Walter’s model 2. Gordon’s model 3. Modigliani and Miller’s hypothesis.
On the relationship between dividend and the value of the firm different theories have been advanced.
The document discusses different models and theories of dividend policy, including:
- Walter's theory, which uses a mathematical model to show that a company's dividend policy impacts its valuation. The model relates market price to factors like dividend payout, internal rate of return, and cost of capital.
- Gordon's theory, another mathematical model that explicitly links market value to dividend policy. It determines value based on perpetual dividends, cost of capital, and growth rate.
- Modigliani-Miller theory, which argues that dividends are "irrelevant" for valuation as investors will value a company based on its investment policy and earnings, not its dividend history. Dividends and capital gains are considered
This document discusses fixed index annuities as a retirement planning strategy. It notes that fixed index annuities offer guarantees of principal, tax deferral, flexibility, access to funds, and a lifetime income stream. They allow interest to be credited based on the growth of a chosen market index while protecting the principal. Fixed index annuities also guarantee income for life and can help address concerns about outliving one's savings.
Dividend decision in financial management and decision makingshrutisingh143670
The document discusses factors to consider when determining a company's dividend policy. It explains that a dividend policy involves deciding how much of profits to distribute as dividends versus retaining earnings. The dividend payout ratio, stability of dividends, liquidity, growth plans, and control are important factors to consider. An effective policy balances paying dividends to investors with retaining enough earnings to finance future growth opportunities.
Retirement planning is a constantly changing subject. John Friar, AIF, of HJB Financial walks employers through the new landscape of retirement planning.
Understanding the Affordable Care Act: Should You Pay or Play?EPAY Systems
The Affordable Care Act (ObamaCare) is upon us and there’s a lot to do in order to be ready for the employer mandate coming in Jan 2015. It starts with determining if you should pay or play. Jennifer Kraft, gives us an update of where healthcare reform stands now and how to calculate your real cost. She’ll also cover: what steps should you be taking right now to determine whether you should pay or play; how can you ensure that you’re minimizing the financial impact of the ACA on your business?
Jennifer Kraft of Seyfarth Shaw LLP, will review this pay or play mandate and ways employers can mitigate the financial impact, including:
◾Are you even subject to the Affordable Care Act and if you are, what are your options? Which employees must you offer coverage to or pay a penalty? What are the state exchanges and how do they work with the employer mandate?
◾How is the employer penalty calculated?
◾How will the expansion of eligibility for Medicaid in your state affect the employer penalty? How do you discover whether your state’s ruling will impact your employees and who you will need to provide insurance to?
◾If your employee hours vary (i.e., part-time and fluctuating schedule workers in industries such as retail, hospitality, and health care), how do you calculate your ACA liabilities?
◾What steps should you be taking right now to determine whether you should pay or play? How can you ensure that you’re minimizing the financial impact of the ACA on your business?
In addition, EPAY will briefly discuss how a time and labor management system can help you monitor and track the data required to make these decisions and manage the ACA on an ongoing basis. Automated tools from your time-tracking system, such as reports and alerts, will be critical to managing who is eligible and mitigating the risk of non-compliance. For more than 60 years, Seyfarth Shaw has been recognized as one of the “go-to” labor and employment firms for business by providing extraordinary, cost-effective results. EPAY Systems, Inc. has joined forces with Seyfarth Shaw to educate employers of distributed labor environments on how compliance risk can be minimized
.
The document discusses Family Investment Companies (FICs), which are private companies used as an alternative to family trusts. Key features of FICs include shareholders being family members and enabling parents to retain control over assets in a tax efficient manner. Typical structures involve parents providing funds through interest-free loans or preference shares and retaining voting shares. FICs allow profits to accumulate and be distributed to family members in a tax efficient way. However, future changes to taxation of retained profits could impact the benefits of FICs. Planning is needed to ensure FICs continue to provide estate planning benefits for families.
This document provides information on salaries, case studies, and spending priorities for OSMA Investment Program participants. It notes that desirable locations like Dallas or Austin offer starting salaries in the low $200k range, while OUHSC starts around $250k and private groups pay mid to high $300k. A case study outlines debts totaling $200k in school loans, $240k mortgage, $25k car loan, and $25k credit cards against a $375k salary. It recommends paying off highest interest debt first, consolidating if possible, and saving at least 10% of income across IRAs, education accounts, and emergency funds.
Business Law & Order - January 20, 2014 - Tax PlanningAnnArborSPARK
The document provides an overview and summary of a presentation on tax planning related to equity incentive strategies, valuation methodologies, challenges in valuing early stage companies, and the net investment income tax. It discusses share-based payment awards, considerations in selecting valuation models, difficulties in valuing startups, and details of the additional 3.8% tax on net investment income over certain thresholds. Examples are also given to illustrate how the net investment income tax applies in different scenarios.
This document introduces the concept of private third party pension sponsorship as a way to address issues in the UK pension industry. It notes that current industry approaches are failing to solve the widening savings gap or rebuild consumer confidence and trust. A new, innovative, consumer-focused approach is needed that provides extra funding, education, and flexibility while reducing risks. Private third party pension sponsorship could potentially improve financial outcomes for savers, tackle consumer negativity, and help address employer budget constraints by shifting some liability to the private sector.
Similar to Trust losses, FTEs & IEEs DSummerson (20)
2. • Historical Context
• Trust Losses
- Fixed v Non-Fixed
- Applicable Tests
- Test Periods
• Family Trust Elections
- Concessions
- Restrictions
- Test Individual
- Family v Family Group
• Interposed Entity Elections
Content
3. • Tax Losses were once a valuable commodity. They were openly traded.
• Prior to 1953 it was common to see advertisements in the financial press
for the sale of companies with losses.
• The government has since introduced increasingly complicated legislation
in order to prevent the trading in losses.
• Deductions are now denied if they do not reflect an underlying economic
loss. (Substance over form & Matching Principles).
• From 2005 – 2010, $21 billion in losses were disallowed by the ATO, over
half were capital losses.
Tax Losses – Historical Context
4. • Fixed v Non-Fixed
– Fixed if there are ‘Fixed Entitlements’.
– Fixed Entitlements are ‘Vested and Indefeasible’ interests in income or capital of the
trust.
– Vested interests are either :
– ‘in possession’ - presently existing right to enjoyment; or
– ‘in interest’ - presently existing right to future enjoyment.
– Indefeasible interests are interests that cannot be varied by the exercise of a power by
the trustee or another person.
– Vested and Indefeasible not defined in the tax law – look at the Deed!
– Why do we care about the type of trust?
– Different tests apply.
Trust Losses – Establishing the Type of Trust
5. The Tests
Unfortunately, a lot of our clients have non-fixed (discretionary) trusts.
Therefore, we must look at all four tests.
Important note: Many unit trusts which might be regarded as ‘’fixed’’ may
in fact be non-fixed if there is any element of discretion in relation to
entitlement of income or capital. Again, look at the deed.
Test Fixed Trusts Non-Fixed Trusts
Pattern of Distributions Yes
Control Yes
50% Stake Yes Yes
Income Injection Yes Yes
6. • Applies to non-fixed trusts only.
• Cannot be applied if the trust did not distribute income or capital in the
income year and at least one of the six earlier income years.
• Is used to prevent the use of a prior year’s loss in an income year if the
same individuals have not received income or capital distributions
between the loss year and the year in which the losses are sought to be
applied.
• Satisfied if:
– a.) individuals x,y,z received > 50% of all ‘test year’ income and capital distributions
– b.) individuals x,y,z received >50% of all income year income and capital distributions
Pattern of Distributions Test
8. • Can the test be applied?
– The trust must be non-fixed
– There must have been a distribution in the income year and in one of the other eligible
years as per slide seven.
• Application:
– Use slide seven, steps 1-3 to establish a test year. If no test year can be established, the
test cannot be applied.
• Variation in distributions?
– If the distributions vary between the income year (year loss is sought to be applied) and
the test year, the smallest aggregate distribution must be used to determine whether
the >50% test is met as per slide six.
Pattern of Distributions Test - Application
9. • The mild-mannered Megan trust is non-fixed. There are five beneficiaries
as listed: Jo, Sarah, Paris, Dominique and Sandy.
• The trust incurred a loss in the 2012-2013 income year and seeks to use
the loss in the 2013-2014 income year.
Pattern of Distributions – Example
10. Percentage of Income Distributions Percentage of Capital Distributions
Income Year Jo Sarah Paris Jo Dominique Sandy
2007-2008 50 25 25 50 25 25
2008-2009 50 25 25 50 25 25
2009-2010 50 25 25 50 25 25
2010-2011 33 33 34 33 33 34
2011-2012 33 33 34 10 20 70
2012-2013 0 0 0 0 0 0
2013-2014 50 25 25 70 10 20
Pattern of Distributions - Example
11. • Can the POD test be applied?
– Yes, there was income and/or capital distributed in the income year, and in one of the
six earlier years.
• Working out the test years using slide seven:
– Start with the loss(trigger) year and work backwards. The first year in which income
and/or capital was distributed was the 2011-2012 year.
– Therefore, the test years are the 2011-2012 year and the year in which the loss is
sought to be applied (2013-2014 year).
• Do the distributions vary at all?
– Yes, therefore we must use the smallest distribution for each beneficiary and aggregate
the total.
– The income distribution aggregate is 83% (Jo 33, Sarah 25 and Paris 25). Therefore the
income test is passed.
– However, the capital distribution aggregate is only 40% (Jo 10, Dominique 10 and
Sandy 20). Therefore, the capital test is failed and the loss cannot be recouped.
Pattern of Distributions - Solution
12. • Applies to non-fixed trusts only.
• Is met if no group begins to control the trust during the test period.
• Is used to prevent the use of a prior year’s loss in an income year if the
same ‘group’ has not maintained control between the loss year and the
year in which the losses are sought to be applied.
• A group can be:
a.) A person;
b.) A person and one or more ‘associates’, or
c.) two or more ‘associates’ of a person
• Associate is a very broad term; it can be relatives, partners in a
partnership, the trustee of a trust under which the taxpayer (or an
associate) is a beneficiary, and a company that is ‘sufficiently influenced
by’ or ‘controlled’ by a taxpayer (or an associate).
The Control Test
13. • A group has control if:
– It has the power to obtain the beneficial enjoyment of the trust income or capital; or
– It is able to control the application of trust income or capital; or
– It is able to gain control of the power to do either of the above.; or
– It’s directions, instructions or wishes would be acted upon by the trustee, either by
obligatory (explicit) or customary (implicit) expectations; or
– It has the power to remove or appoint the trustee; or
– It acquires more than a 50% stake in the trust income or capital.
• Important Note:
– Control is not deemed to have changed if a member of the controlling group has died,
become incapacitated or suffered a marriage breakdown.
The Control Test – What is Control?
14. • A discretionary trust, established for the Summerson family and the
Labiris family, has a $0.25 loss in year 1 which it seeks to deduct in year 2.
• During year 2, the Summerson family obtain a court order to have the
trustee (Bill Labiris) removed due to him gambling all of their income away
at the pokies.
• The control test is not met as the Summerson group begins to control the
trust during the test period.
The Control Test - Example
15. • The 50% stake test applies to both fixed and non-fixed trusts.
• It is applied to determine whether there has been a change in ownership
of a trust under which there are fixed entitlements (in a fixed or non-fixed
trust).
• To apply the 50% stake test to a non-fixed trust:
– There must have been individuals with more than a 50% fixed stake in the income
and/or capital at any time during the test period.
The 50% Stake Test – Non-Fixed Trusts
16. • To pass the 50% stake test as a non-fixed trust:
– The same individuals must have had more than a 50% stake in the income or capital
during the periods:
– a.) The start of the loss year to end of income year in which loss is applied; or
– b.) The time when the individuals began to have more than a 50% stake to the end of
income year in which the loss is applied.
• Important Note: For non-fixed trusts, the 50% stake test is applied
separately to income and capital. If there was never a fixed entitlement to
capital, only the income is subject to the test.
Passing the 50% Stake Test – Non-Fixed Trusts
17. • A non-fixed (hybrid) trust incurs a loss in the 2012-2013 year.
• It wishes to apply that loss to income earned in the 2013-2014 year.
• At the start of the loss year, Daniel and Nick both have fixed entitlements
to 20% of the income. Thus, only 40% is held under fixed entitlement.
• David acquires a fixed entitlement to 25% of the income at 01/12/2012.
Now 65% is held under fixed entitlement. These percentages are
maintained until 30/06/2014.
• The 50% stake condition is now passed as there was more than 50% held
under fixed entitlement between 01/12/2012 (during the loss year) and
30/06/2014 (the end of the recoupment year).
• Capital would be treated separately.
50% Stake Test – Non-Fixed Trusts - Example
18. • Is applied differently to fixed trusts.
• The test must be satisfied in respect of both income and capital.
• The test applies continuously.
• There is a second chance to pass – an alternative test for fixed trusts.
50% Stake Test – Fixed Trusts
19. • Applies to fixed trusts only.
• Is a second chance to pass the 50% Stake Test.
• Can be applied if:
– The majority of fixed entitlements are held by non-fixed trusts
– Those non-fixed trusts pass the following tests;
– a.) Pattern of Distributions Test
– b.) 50 % Stake Test
– c.) Control Test
Alternative Test
20. • Is an anti-avoidance provision.
• Applies to all trusts.
• Is failed when:
– 1.) The trust has an allowable deduction.
– 2.) There is a ‘scheme’ under which:
– a.) assessable income is derived by the trust;
– b.) an ‘outsider’ provides a benefit to the trustee, a beneficiary or associate of either;
– c.) the trustee, a beneficiary or associate of either provides a benefit to the ‘outsider’
– 3.) The benefits discussed above occurred because of the existence of the allowable
deduction. i.e. they were not merely incidental.
• Scheme has the same meaning as in Part IVA of the ITAA1936.
Income Injection Test
21. • Benefits received from and provided to an ‘outsider’ may result in the
income injection test being breached.
• In relation to normal fixed and non-fixed trusts the term ‘outsider’ means
anyone other than:
– the trustee;
– a person with a fixed entitlement to trust income or capital.
• Therefore, in the case of most discretionary trusts, anyone other than the
trustee is an ‘outsider’.
• In the case of family trusts, the term ‘outsider’ is relaxed.
Outsiders
22. • Must be passed for either an FTE or an IEE to be made.
• Must be passed at the end of the income year for which the election is
made.
• The test individual and/or members of the test individual’s family must
‘control’ the trust.
• Control has the same meaning as the control test in slide 13.
Family Control Test
23. • A family trust is created when a family trust election is made.
• A family trust is eligible for concessional treatment.
• No 50 % Stake Test
• No Control Test
• No Pattern of Distributions Test.
• Makes the first 20 slides irrelevant.
• Only Income Injection Test is applicable.
Family Trusts – Why Elect to Create One?
24. • Prior year and current year losses can be deducted along with bad debts
(subject to meeting the income injection test).
• The trust can pass the 45 day holding period allowing franking credits to
pass through to beneficiaries.
• The family trust is treated as a single individual when applying COT to
companies held by the trust (no tracing required).
• An interposed entity can apply to be part of the family group.
• Caveat: With a family trust election in place, the trustee cannot distribute
to a person outside of the family group without incurring family trust
distribution tax (FTDT). FTDT is imposed on the trustee at 46.5% and is in
addition to any tax payable by a beneficiary.
Family Trusts – Tax Concessions
25. • An individual must be chosen (test individual) when an election is made.
• The test individual’s ‘family group’ is taken into account for family trust
purposes.
• Important note: ‘family group’ is not the same as ‘family’.
• A member of the test individual’s family is excluded from the category
’outsider’ for income injection test purposes.
• A member of the test individual’s family group is not necessarily excluded
from being an ‘outsider’ for income injection purposes. Family group can
contain a much broader group of people than family.
Family Trusts – The Test Individual & The Family Group
27. • Everyone in the previous slide, plus;
• Previous spouse of anyone in the previous slide before marital breakup.
• Previous widow/er of anyone in the previous slide who is now remarried.
• Previous stepchild of anyone in the previous slide before marital breakup.
• A trust covered by the family trust election.
• A trust with the same test individual as this trust.
• An entity that has made an ‘Interposed Entity Election’ with the trust.
• An entity in which a fixed entitlement to all of the income and capital is
due to the above mentioned entities.
• If the test individual and all family members are dead, their estates.
• A lot of people/entities.
The Test Individual’s Family Group
28. • Aim of revocation or variation:
– To get around the FTDT applied to distributions to ‘outsiders’.
• Revocation conditions:
– The FTE was not required during its election period (losses were not utilised, franking
credits were not accessed and bad debts were not deducted).
– Revocation occurs within 5 years of the FTE being made.
• Caveat: Once a Family Trust Election has been revoked, the trust can never
make another.
Family Trust Elections – Revocation or Variation
29. • Variation Conditions:
• The specified individual (test individual) can be varied if both;
• a.) The new individual was a family member of the original test individual.
• b.) All previous distributions were made within the new individual’s family
group.
Family Trust Elections – Revocation or Variation
30. • An entity interposed between the family trust and its members.
• Elections may be retrospective (to the 2004 year).
• Elections generally are not revocable unless stringent measures are met.
• An interposed entity can generally only make an interposed entity election
for one family trust.
Interposed Entities
31. • The entity becomes a member of the family group. Therefore it can;
• Receive distributions from the family trust.
• Make distributions to entities within the family group.
• Avoid FTDT.
Why Make an Interposed Entity Election?
32. • Entities are automatically included in the test individual’s family group if;
• It is a company, partnership or an ordinary fixed trust; and
• 100% of the fixed entitlements to the income and capital are held by:
• a.) the test individual;
• b.) members of the test individual’s family; or
• c.) the trustee of a trust that has the same test individual; or
• d.) a trust that made a family trust election.
When is an Interposed Entity Election Not Required?
34. • There are lots of tests surrounding the eligibility of applying trust losses.
• Most of them can be negated by making a Family Trust Election.
• FTEs and IEEs must be made after careful deliberation.
• Once made they are difficult to revoke.
• Sometimes they may not be necessary.
• Check Deeds.
Summary