Tax Laws Amendment (Small Business) Act 2007 (80 of 2007)

Schedule 4   Capital gains tax small business concessions

Part 1   Main amendments

Income Tax Assessment Act 1997

21   After section 152-40

Insert:

152-42 Trustee of discretionary trust may nominate beneficiaries to be controllers of trust

(1) This section applies for the purposes of determining, for the purposes of subparagraph 152-40(1)(a)(ii) or paragraph 152-40(1)(b), whether an entity is *connected with you.

Note: This affects whether a CGT asset that you own satisfies the active asset test.

(2) The trustee of a discretionary trust may nominate not more than 4 beneficiaries as being controllers of the trust for an income year (the relevant income year ) for which the trustee did not make a distribution of income or capital if the trust had a *tax loss, or no taxable income, for that year.

(3) A nomination under subsection (2) has effect as if each nominated beneficiary controlled the trust for the relevant income year in a way described in section 328-125.

Note: This means each nominated beneficiary is connected with the trust.

(4) A nomination under subsection (2) must:

(a) be in writing; and

(b) be signed by the trustee and by each nominated beneficiary.