House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 9 - Abnormal trading, 50% stake, pattern of distributions, control and same business

Overview

9.1 Division 269 defines certain important concepts used in determining whether a trust can deduct a prior year or current year loss or debt deduction [section 269-5] . The meaning of each of these concepts is set out below.

When is there abnormal trading of units in a widely held unit trust?

9.2 The abnormal trading concept is used in determining when widely held unit trusts can deduct prior or current year losses or debt deductions. Whether there is an abnormal trading will be determined in one of two ways.

Where the trading is abnormal on balance having regard to certain factors

9.3 The first method is a general factual test where a number of factors must be weighed to determine whether the trading is, on balance, abnormal. Trading in this context means an issue, redemption or transfer of units in the widely held unit trust or other dealing in the trust's units [section 269-10] . All relevant factors (including the four factors specified in the Bill) must be taken into account in determining whether a trading is abnormal. The specific factors in the Bill are:

•

the timing of the trading when compared to the normal timing for trading in units of the trust;

•

the number of units traded by comparison to the normal number of units traded (e.g. voluminous trading in units may indicate the possibility of a significant change in the underlying beneficial ownership of the trust);

•

any connection between the trading in units and any other trading (e.g. two or more lots of trading may be linked and may indicate a meaningful change in underlying beneficial ownership of the trust); and

•

any connection between the trading and a tax loss or other deduction of the trust (e.g. where units are bought because the trust has prior year losses). [Subsection 269-15(1)]

Where abnormal trading is deemed to have occurred

9.4 Abnormal trading will automatically be taken to have occurred in four sets of circumstances, as explained below. [Subsection 269-15(2)]

Suspected acquisition or merger

9.5 Firstly, there is an abnormal trading in units where the trading is part of a proposed acquisition of the trust or a proposed merger with another trust. However, the trading will only be abnormal where the trustee knows or reasonably suspects this to be the case. The abnormal trading will be taken to occur at the time of the trading. [Section 269-20]

Trading of 5% or more in one transaction

9.6 Secondly, there is abnormal trading if 5% or more of the units in the trust are traded in one transaction [section 269-25] . The size of such a transaction is enough to indicate that there may have been a significant change in the underlying beneficial ownership of the trust.

5% or greater trading over 2 or more transactions

9.7 Thirdly, there is abnormal trading if a person and/or associates of the person have acquired and/or redeemed 5% or more of the units in the trust in two or more transactions. However, this is only where the trustee of the trust knows or reasonably suspects that the acquisitions or redemptions have occurred and that they would not have been made if the trust did not have a tax loss or other deduction. This rule is similar in nature to the one above (paragraph 9.6) but looks to the situation where the possibility of a significant change in underlying ownership is disguised in a number of transactions. [Subsection 269-30(1)]

9.8 If an abnormal trading is deemed to have taken place by the rule in paragraph 9.7, the time of the trading is the time of the transaction that pushes the trading over 5%. [Subsection 269-30(2)]

More than 20% change in a 60 day period

9.9 Lastly, there is abnormal trading if more than 20% of the units in a trust on issue at the end of any 60 day period are traded during that period [section 269-35(1)] . This could occur if:

•

ownership of more than 20% of the units changes in a 60 day period;

•

units are issued to new unit holders and at the end of a 60 day period they have more than 20% of the units on issue; or

•

more than 20% of the trust's units are redeemed in a 60 day period.

9.10 It could also occur if there is a combination of any one or more of the above so that more than 20% of the units are traded.

9.11 Again, these facts are enough to indicate that there may have been a significant alteration in the underlying beneficial ownership of the trust. If an abnormal trading is deemed to have taken place by the rule in paragraph 9.9, the time of the trading is the end of the 60 day period. [Subsection 269-35(2)]

Example

9.12 An unlisted widely held trust has 100 units owned, directly and indirectly, by 30 individuals. On a day, 50 new units are issued to Jack, Jill, Mary and Bill, none of whom are existing unit holders.

9.13 There is an abnormal trading at the time of issue because, in the sixty days to that time, the new unit holders have gained, through issue, one third of the units on issue after that time.

Special abnormal trading rules for wholesale widely held trusts

9.14 For the purposes of wholesale widely held trusts only, there are special abnormal trading rules. A wholesale widely held trust is a kind of widely held unit trust and is defined in section 272-125 (see paragraphs 13.87 to 13.90).

9.15 Since wholesale widely held trusts have a relatively small amount of direct unit holders, some of the abnormal trading tests are not appropriate because they may be triggered on a regular basis through the normal trading of the trust's units. These are the tests that set a specific mathematical threshold (sections 269-25, 269-30 and 269-35). Accordingly, these three sections do not apply in determining whether there has been abnormal trading in the units of a wholesale widely held trust.

9.16 Abnormal trading in a wholesale widely held trust occurs:

•

when there is abnormal trading on balance (this is the same as what is discussed at paragraph 9.3);

•

when there is a suspected merger or acquisition of the trust (this is the same as what is discussed at paragraph 9.5); or

•

if the trustee knows or reasonably suspects that the persons that held more than 50% of the units in the trust at the beginning of the period did not hold more than 50% of the units at the end of the that period (where this is the case, the abnormal trading occurs immediately before the end of the period). [Section 269-40]

When does a trustee have to know or reasonably suspect that certain things have occurred?

9.17 For the purposes of the abnormal trading tests that talk about a trustee knowing or reasonably suspecting that certain things have occurred, a provision is included to clarify when that state of mind can arise. In general terms, if the state of mind arises at any time during the relevant test period, the abnormal trading will have occurred at the relevant time in the period. In the case of the current year loss provisions which require a trust to calculate its net income and tax loss for an income year in a special way, if the state of mind arises during the income year, the abnormal trading will have occurred at the relevant time in the year. [Section 269-45]

Abnormal trading where there is a holding trust

9.18 The Bill provides a special abnormal trading rule for a unit trust that is a subsidiary of another unit trust. The rule applies where a unit trust (the holding trust ) holds fixed entitlements, directly or indirectly, to all the income and capital of another unit trust (the subsidiary trust ). In this case there is abnormal trading in the subsidiary trust only when there is abnormal trading in the holding trust which is not itself a subsidiary trust of another holding trust. [Subsections 269-47(1) and (3)]

9.19 However, a transaction which causes a trust to become, or cease to be, a holding trust of a subsidiary (the bottom subsidiary trust ) is abnormal trading in that subsidiary but not where:

•

the holding trust is itself a subsidiary trust of another holding trust or trusts (each of which is a higher holding trust ); and

•

before and after the transaction the bottom subsidiary trust was a subsidiary of a higher holding trust. [Subsection 269-47(2)]

Example

9.20 In the above ownership structure the A Unit Trust is a holding trust of the B Unit Trust, C Unit Trust and the D Unit Trust. As long as this is the case, there is only an abnormal trading in the latter trusts when there is abnormal trading in the A Unit Trust. If the B Unit Trust sold any of its units in the D Unit Trust, there would be abnormal trading in the D Unit Trust unless the units were sold to the A Unit Trust or the C Unit Trust or another subsidiary of the A Unit Trust.

No abnormal trading where there is a proportionate issue of units

9.21 A trust may issue units to existing units holders on a pro-rata basis such that the extent of the unit holders interest in the income and capital of the trust does not change as a result of the issue. Such an issue will not, of itself, constitute abnormal trading. To this end, there will be no abnormal trading (except in the case of a suspected takeover or merger) where, after trading, the respective fixed entitlements of unit holders to shares of income and capital of the trust continue to be held (whether beneficially or not) in the same proportions. [Section 269-49]

50% stake (continuity of ownership)

9.22 The 50% stake concept is used in determining whether there has been a change in ownership of a trust with fixed entitlements.

When do individuals have more than a 50% stake in the income or capital of a trust?

9.23 An individual or group of individuals have more than a 50% stake in the income or capital of a trust if those individuals hold, directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income or capital of the trust. [Subsections 269-50(1) and (2)]

When does a trust pass the 50% stake test?

9.24 A trust passes the 50% stake test if, at the relevant times:

•

the same individuals have more than a 50% stake in the income of the trust; and

•

the same individuals have more than a 50% stake in the capital of the trust (these individuals need not be the same as those who hold the fixed entitlements to income). [Subsection 269-55(1)]

9.25 A special rule applies in the case of widely held unit trusts under which a trust is taken to pass the 50% stake test if it is reasonable to assume that the requirements of subsection 269-55(1) are satisfied. [Subsection 269-55(2)]

9.26 The relevant times are the times during the test period when the 50% stake test has to be satisfied. For example, an ordinary fixed trust has to meet the 50% stake test at all times during the test period (see paragraph 6.16).

When does a person have a fixed entitlement to income or capital?

9.27 The meaning of a fixed entitlement in the income or capital of a trust is explained at paragraphs 13.3 to 13.13. Broadly, a person has a fixed entitlement where he or she has a vested and indefeasible interest in the income or capital of the trust (whichever is relevant). Some interests can be included as fixed entitlements where the Commissioner makes a determination to that effect.

When does a person have a fixed entitlement to income or capital for their own benefit?

9.28 A person has something for his or her own benefit if the person has the thing otherwise than in the capacity of a trustee.

When does a person have a fixed entitlement to income or capital indirectly?

9.29 Fixed entitlements will be taken to be held by an individual indirectly where the entitlements are held through one or more interposed companies, trusts or partnerships. Paragraphs 13.17 to 13.46 set out the detailed rules that apply in determining whether a fixed entitlement is taken to be held indirectly.

An example of the application of the 50% stake test

9.30 Trust A, an ordinary fixed trust, has a prior year loss from Year 1. In Year 2, the Trust seeks to deduct that loss. Throughout Year 1 and part of Year 2 the following persons hold the fixed entitlements set out:

•

Jack has a 50% fixed entitlement to income and a 30% fixed entitlement to capital on winding up;

•

Jill has a 50% fixed entitlement to income and a 30% fixed entitlement to capital on winding up;

•

Mary has a 20% fixed entitlement to capital on winding up;

•

Bill has a 20% fixed entitlement to capital on winding up.

9.31 During Year 2, both Jack and Jill sell half of their fixed entitlements in Trust A to James. As a result, from the time of sale, James has a 50% fixed entitlement to income and a 30% fixed entitlement to capital on winding up.

9.32 Before the sale, Jack, Jill, Mary and Bill have, between them, 100% of the fixed entitlements to both income and capital of Trust A. After the sale, Jack, Jill, Mary and Bill have, between them, a fixed entitlement to income of 50% and a fixed entitlement to capital of 70%.

9.33 Trust A fails the 50% stake test and the loss is not deductible. This is because there has been a 50% change in the natural persons who hold fixed entitlements to income of the trust for their own benefit. That is, the original owners of more than 50% of the fixed entitlements have not held more than 50% of the fixed entitlements to income of Trust A throughout the test period.

Pattern of distributions test

9.34 The pattern of distributions test is used in determining whether a non-fixed trust can deduct a prior year loss and some debt deductions.

What is the pattern of distributions test?

9.35 The pattern of distributions test is passed if, within two months of the end of the income year ^[F8] :

•

the trust has distributed, directly or indirectly, more than 50% of every 'test year distribution' of income to the same individuals for their own benefit; and

•

the trust has distributed, directly or indirectly, more than 50% of every 'test year distribution' of capital to the same individuals for their own benefit (these individuals need not be the same as those to whom income is distributed). [Section 269-60]

When is income or capital distributed to an individual for their own benefit?

9.36 A person is distributed something for his or her own benefit if the person is distributed the thing otherwise than in the capacity of a trustee.

What is a distribution of income or capital?

9.37 The term 'distribution of income or capital' has the meaning given to it by Subdivision 272-B. Under this Subdivision distributions made by a trust will include both ordinary distributions of income or capital (see section 272-45) and distributions that fall within an extended meaning as specified in section 272-60.

9.38 A distribution will also be taken to have been made to an individual where a trustee does not directly or indirectly actually make a distribution to an individual but the distribution has been made to an interposed entity in which the individual has a direct or indirect fixed entitlement (see section 269-75).

What is a 'test year distribution' of income or capital?

9.39 A test year distribution of income is the total of all distributions of income in a relevant period (generally an income year) made by the trust but excludes distributions of income in an income year which starts more than 6 years before the start of the income year in which the trust seeks to deduct the prior year loss. A relevant period is:

•

the income year being examined and the two months after the income year (the end year) ^[F9] ;

•

the earliest of:

-

the income year in which the trust distributed income that is before the loss year but closest to the loss year;

-

the loss year, if the trust distributed income in that year; or

-

the income year in which the trust distributed income that is not before the loss year but is closest to the loss year;

(The earliest of these three years is called the start year below).

•

each intervening income year between the start year and the end year. [Subsection 269-65(1)]

9.40 The test applies in the same way to distributions of capital to determine what is a 'test year distribution' of capital. [Subsection 269-65(3)]

9.41 Where distributions prior to the 1995 Budget time have to be taken into account in applying the pattern of distributions test under the above rules, a transitional rule applies to treat the members of a particular family as one individual for the purposes of the test (see paragraph 15.6).

What is the percentage of a test year distribution distributed to an individual?

9.42 The percentage of any test year distribution of income or capital for any income year distributed by a trust to an individual is the total income or capital distributed to the individual as a percentage of the total income or capital for that year distributed by the trust.

When an individual receives different percentages

9.43 If the trust does not distribute to each of the individuals the same percentage of income or capital in every test year distribution then the percentage of a test year distribution that is taken to have been distributed by the trust is the smallest percentage that has been distributed [section 269-70] . This rule is necessary because each test year distribution will not necessarily be of the same value and there could be large swings between the percentages received by individuals which demonstrate an effective change in those benefiting from the trust. The rule will ensure some comparability between the distributions that are being tested.

Example of how the smallest percentage is used

9.44 Year 7 is the current income year. A trust has a loss incurred in Year 6. The trust has made one distribution of income for Years 1, 2, 3 and 4 and two distributions for Year 7. No distributions of capital have been made for Year 7. This means it is not possible to apply the test for any distributions of capital by the trust.

9.45 In accordance with the test discussed in paragraph 9.39, the end year is Year 7 (i.e. the current income year) and the start year is Year 4. Year 4 is the start year because it has a distribution made before the loss year that is closest to that loss year. To work out the test year distribution for each year, each distribution of income for the year made to any person is totalled. The percentage of the total distributed to each individual is that individual's share of the test year distribution.

9.46 The test year distributions made by the trust are as set out in Table 9.1

9.47 In this example, the trust does not satisfy the pattern of distributions condition. This is because only 30% of each test year distribution has been distributed to the same individuals, having regard to the fact that each individual is taken to have received the smallest percentage for each test year distribution. In essence, if the total worked out by adding the smallest percentage of each individual is more than 50%, the test is passed (in the above example, the smallest percentages are those in the far right column).

Incomplete distributions

9.48 A trust may make a distribution to an interposed entity which does not subsequently make an on-distribution to individuals within two months of the end of the income year. For the purpose of tracing distributions under the pattern of distributions condition, the interposed entity will be taken to have distributed all or part of a test year distribution of income or capital to an individual. This will be the case if the individual holds (otherwise than in the capacity as trustee) a fixed entitlement (directly or indirectly) to a share of the undistributed amount held in the interposed entity at the end of two months after the income year. ^[F10] [Section 269-75]

9.49 For the purpose of calculating an individual's share of the distribution made to the interposed entity, the same rules as those used in tracing fixed entitlements for the 50% stake test are applied. The individual will be treated as having been distributed a portion of the distribution equal to the amount of the distribution in the interposed entity multiplied by the individual's direct or indirect fixed entitlement to the income or capital of that entity.

9.50 If there are no individuals who had a fixed entitlement in the interposed entity (e.g. it is a discretionary trust), no individuals will be taken to have been distributed any amount.

Examples of how to trace where there are incomplete distributions

Example 1

9.51 Trust A distributes $3,000 income of an income year to a beneficiary of the trust, Company B. The ordinary shares in Company B are held in equal shares by Jill, Ben and Sam at the end of two months after the end of the income year. There are no other share holdings in the company. Company B does not declare a dividend before the end of two months after the end of the income year. As Jill, Ben and Sam have fixed entitlements in the income of Company B they will be treated as each having been distributed a third of the trust income (i.e. $1,000) in the year of income.

Example 2

9.52 Trust A distributes $3,000 income of an income year to Trust B which is a discretionary trust in which no beneficiary has a fixed entitlement to income. Trust B makes no distribution attributable to the distribution from Trust A before the end of two months after the end of the income year. As there are no individuals who have a fixed entitlement to the income or capital of the discretionary trust, no individuals will be taken to have been distributed any part of the $3,000.

What if an individual can no longer receive a distribution of income or capital because of death or breakdown in a marriage?

9.53 In the absence of any special provision, the pattern of distributions condition may be failed by non-fixed trusts that are not family trusts as defined where the potential beneficiaries of the trust included natural persons who have died or who no longer benefit under the trust because of a breakdown in a marriage to which the individual is a party. ^[F11]

9.54 To overcome this problem distributions which have been received by a deceased person or a person whose marriage has broken down will be ignored in applying the pattern of distributions test to a trust. Also, where a deceased person beneficially had a direct or indirect fixed entitlement in the trust and that entitlement is passed on to the person's deceased estate or a beneficiary under the estate, the distributions flowing to that estate or beneficiary from the fixed entitlements will also be ignored in applying the pattern of distributions test. [Section 269-80]

When does a trust make a distribution of income or capital to an individual indirectly?

9.55 Broadly, a trust will be taken to distribute income or capital to an individual indirectly where an amount or property attributable to the income or capital is distributed through one or more interposed companies, trusts or partnerships to the individual. Paragraphs 13.62 to 13.68 set out the detailed rules that apply in determining whether income or capital is distributed indirectly.

Avoidance arrangements

9.56 The Bill contains a provision to deal with avoidance arrangements designed to ensure that persons do not enter into arrangements that ensure the pattern of distributions test is satisfied. The Commissioner will be allowed to treat a distribution as not having been made if certain conditions are met.

9.57 The conditions are that an arrangement has been entered into where:

•

the arrangement in some way (directly or indirectly) related to, affected or depended for its operation on the distribution or its amount or value; and

•

the purpose, or one of the purposes, of the arrangement was to ensure that the condition in subsection 267-30(2) was met by a trust. [Section 269-85]

When does a group control a non-fixed trust?

9.58 The concept of control of a non-fixed trust is relevant to determining whether a non-fixed trust can deduct a prior or current year loss or debt deduction (see sections 267-45 and 267-75). The relevant rules are triggered if a person and/or his or her associates (called a group), either alone or together, begin to control a non-fixed trust in the test period.

9.59 A group is taken to control a non-fixed trust if the group:

•

has the power, by whatever means, to obtain the beneficial enjoyment of the income or capital of the trust (e.g. through obtaining a fixed entitlement to that income or capital or by ensuring the exercise of a trustee discretion in their favour);

•

is able to control, directly or indirectly, the application of the income or capital of the trust;

•

is capable, under a scheme, of gaining the enjoyment or control referred to in the first two dot points;

•

is in a position such that the trustee of the trust is accustomed or under a formal or informal obligation, or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the group;

•

has the ability to remove or appoint the trustee or any of the trustees of the trust;

•

acquires more than a 50% stake in the income or capital of the trust (i.e. gained fixed entitlements to more than 50% of the income or capital). [Subsection 269-95(1)]

9.60 Whether the trustee of the trust is accustomed or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group is to be determined having regard to all the circumstances of the case. For example, the mere presence in the trust deed of a requirement that the trustee should have no regard to such directions, instructions or wishes would not prevent the examination of the actual circumstances to determine whether the group controls the trust.

9.61 Some examples of the factors which might be considered are:

•

the way in which the trustee has acted in the past;

•

the relationship between the group and the trustee;

•

the amount of any property or services transferred to the trust by the group;

•

any arrangement or understanding between the group and a settlor or persons who have benefited under the trust in the past.

Example

9.62 Trust A has a tax loss in Year 1 which it seeks to deduct in Year 2. At the start of Year 1 it is a purely discretionary trust (i.e. none of the income or capital is the subject of a fixed entitlement). During Year 2, under an arrangement between the original settlor of the trust and a group, 60% of the income of the trust becomes the subject of a fixed entitlement held by the group. In this case, the group begins to control the trust in the 'test period' and the loss is not deductible.

Special circumstances in which control will not be taken to have changed

Death, breakdown in a marriage or incapacity of a controller

9.63 The Billprovides that the control of a trust will be taken not to have changed where a member of the controlling group has died, been a party to a marriage breakdown (separated) ^[F12] or become incapacitated. However, this rule will only apply where:

•

the replacement group consists of all members of the original controlling group (apart from any deceased, separated or incapacitated individual) and any individuals who are members of the family of the deceased, separated or incapacitated individual;

•

the change in the controlling group only occurs as a result of the death, marriage breakdown or incapacity of a controller; and

•

apart from any deceased, separated or incapacitated individual and replacement family members there are no changes in the beneficiaries of the trust. [Subsection 269-95(2)]

9.64 A member of the family of a person is defined in section 272-95. An incapacitated person is one who is mentally or physically disabled such that they can no longer control the trust.

9.65 If these conditions are satisfied and the new arrangements are in place within one year of the death, separation or incapacity of the individual then it will be taken that there has been no change in the control of the trust. This is done by saying that the replacement group is taken to have controlled the trust during the times when the original group controlled it and in any intervening period until the replacement group started its actual control. Also, the following are taken not to have controlled the group:

•

the original group; and

•

any person or persons (e.g. the trustee of a deceased estate) who may have controlled the trust at some time in the intervening period but only because of the death, incapacity or breakdown in the marriage and only where the control does not continue past when the replacement group begins its control. [Subsection 269-95(3)]

9.66 The one year period is intended to give reasonable time for any processes associated with the change in control to occur. For example, where an individual who has died was a controller because he or she owned all the shares in a trustee company, the one year period will allow time for the shares to be transferred to the beneficiaries of the deceased's estate by the trustee of that estate.

9.67 The Commissioner may extend the one year period where he or she considers it reasonable to do so (e.g. where the administration of the estate of a deceased is delayed). [Subparagraph 269-95(2)(b)(ii)]

Other circumstances where control will be taken not to have changed

9.68 The Bill also provides the Commissioner with a discretion to treat a group as not beginning to control a trust where, having regard to all the facts and circumstances of the case, the Commissioner considers it reasonable to do so. This will allow losses to be deducted where, because of the particular circumstances of the case, it is not fair and reasonable to treat the control of the trust as having changed. For example, it may be appropriate for the discretion to be exercised in some cases of retirement where those who can benefit under the trust have not changed. [Subsection 269-95(4)]

What is a group?

9.69 For the purpose of the control test a group is either a person, a person and one or more associates or 2 or more associates of a person. The term 'associate' is defined in section 272-140. [Subsection 269-95(5)]

When does a trust pass the same business test?

9.70 The same business test is relevant to determining whether a listed widely held trust can deduct a prior or current year loss or debt deduction. The test is split up into two parts. The first part is those rules that apply to determine whether the trust passes the same business test for all purposes. The second part applies only in determining whether the trust passes the same business test for current year loss purposes.

9.71 Thus, for prior year loss and debt deduction purposes, the trust needs to satisfy the first part of the same business test. For current year loss purposes, the trust needs to satisfy both the first and second parts of the same business test.

The rules of the test that apply for all purposes

9.72 A trust satisfies this part of the same business test if it meets three cumulative conditions [section 269-100] .

9.73 The first condition is that the trust must, at all times in the period being considered (called the same business test period ), carry on the same business as it carried on immediately before the particular time being considered (called the test time ). [Subsection 269-100(1)]

9.74 The mere status of a trust as a trust does not mean that it cannot carry on a business. [Subsection 269-100(2)]

9.75 The second condition is that the trust must not, at any time in the same business test period, derive assessable income from:

•

a business of a kind that it did not carry on before the test time; or

•

a transaction of a kind that it had not entered into in the course of its business operations before the test time. [Subsection 269-100(3)]

9.76 The third condition is that the trust must not, before the test time, do certain things for the purpose, or for purposes including the purpose, of being taken to have carried on, at all times in the same business test period, the same business as it carried on immediately before the test time [subsection 269-100(4)] . The things that the trust must not do are:

•

start to carry on a business it had not previously carried on; or

•

in the course of its business operations, enter into a transaction of a kind that it had not previously entered into.

The rules of the test that apply for current year loss purposes only

9.77 A trust satisfies this part of the same business test if it does not, at any time in the same business test period:

•

incur expenditure in carrying on a business of a kind that it did not carry on before the test time; or

•

incur expenditure as a result of a transaction of a kind that it had not entered into in the course of its business operations before the test time. [Subsection 269-100(5)]