- Description
- Specifications
The Taxation Act has introduced the definition of a "Family Trust" which can apply to Discretionary Trusts.
The definition of a "Family Trust" was introduced as part of the tightening up of the allowability of the deductions for bad debts and trading losses in Trusts.
To be a Family Trust, a Discretionary Trust will have to make an election. Once made, the election has affect for the income year for which it was made as well as later years.
The election is not revocable and therefore great care should be taken in deciding whether to elect to be a Family Trust under the Taxation Rules.
The paper explains, in thirteen pages of notes and diagrams, the rules of how Family Trusts operate, discusses the Income Injection Test which applies to Family Trusts being able to deduct bad debts and Trust trading losses and also reviews the situation which would apply if a Discretionary Trust wishes to claim a deduction for bad debts and trading losses and has not made an election to be treated as a Family Trust.
In this case the Discretionary Trust has to comply with the Control Test, Pattern of Distribution Test as well as the Income Injection Test.
The paper is presented under the following headings:
- Trust Loss Rules
- Bad Debt Rules
- Tests Which Apply To A Discretionary Trust That Resolves To Be A Family Trust
- Family Trusts
- Family Trust Election
- Income Injection Test
- Family Control Test
- Distributions Of Income From A Family Trust
- Distributions From A Family Trust To An Interposed Entity
- Family Trust - Is This The Right Election To Make?
- Treatment Of Losses In A Company Where A Discretionary Trust Owns More Than 50% Of The Shares
- Not Revocable
- Reasons For Not Electing To Be A Family Trust
- Advantages Of Family Trusts
- Disadvantages Of Electing To Be A Family Trust
- Choice Of Test Individual
- Professional Advice