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'Controlling Individuals', 'Control' and 'Connected with' for Discretionary Trusts

It is relevant to determine whether there is a controlling individual for a Discretionary Trust:

If a capitals gain is made in relation to a CGT event occurring in relation to an interest in the Trust; For the Trust to be eligible for the retirement exemption; For a Trust to be eligible for the fifteen year exemption.

A Trust satisfies the controlling individual test if it has at least one controlling individual immediately before the CGT event.

For a Discretionary Trust, an individual is a "controlling individual" if just before the CGT event, the individual was entitled to at least 50% of all:

Income distributions made in the year the gain was made; and Capital distributions made in the year the gain is made.

If a Discretionary Trust makes a loss, it need only make a distribution of capital to one beneficiary (even as little as one dollar) to have a controlling individual.

If an entity "controls" a Discretionary Trust, that entity and the Discretionary Trust will be "connected" with each other. This is relevant:

For applying the maximum net asset value test; and In determining whether an asset is an active asset.

An entity controls a Trust if:

It is the Trustee of the Trust; or In any of the four years preceding the CGT event, the entity or its small business CGT affiliate received: 40% or more of the total distributions of income; or 40% or more of the total distributions of capital; or If in any of those years the Trust had a tax loss, the entity was one of a maximum of four entities nominated by the Trustee as controllers of the Trust.

For more information any matters relating to taxation and business, contact our Business Law Team.

2019 Ballarat Cycle Classic

2019 Ballarat Cycle Classic

BJT Legal are proud to support the Fiona Elsey Cancer Research Institute in the 2019 Ballarat Cycle Classic.