Injecting income into loss trusts – everyone should be doing it

There is this fear of having losses in discretionary trusts – specifically how do you get them out… The answer is easy. You just inject income into the trust. But what about the income injection test I hear you scream…

First what is the income injection test? It is a test that states that if an outsider injects income into a trust with losses and they only did it as the trust has losses and they will get some benefit in injecting the income, the losses can’t be offset against the injected income.

But who is an “outsider”? If the trust has a family trust election over it then outsiders are anyone NOT covered by the FTE. So if uncle Bob has a business he can just inject his income into the trust and you can give Bob whatever benefit you like… No problems at all.

As long as someone in your “family” is making money then you can get to the losses…

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
This entry was posted in Income Tax, Planning Stuff and tagged , . Bookmark the permalink.

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