Pattern of distributions test for discretionary trusts: Defects reveal questionable policy design and implementation

Published on 01 Aug 15 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

The pattern of distributions test (PODT) is a qualifying rule for revenue loss usage by discretionary trusts (non-fixed trusts) that are not a family trust. The PODT has received little attention from tax commentators. This article is related to an earlier article. The earlier article outlined the technical deficiencies in the PODT and concluded that the PODT is largely ineffective, or at least severely compromised, as a loss-access qualifying criterion for discretionary trusts.

This article focuses on the policy challenges in designing an effective continuity of ownership type test for discretionary trusts, which is what the PODT is. This article concludes that while there are considerable challenges in designing an effective loss-access qualifying criterion for discretionary trusts, the current PODT falls far short of a credible loss-access qualifying rule.

Author profile

Dale Boccabella CTA

Dale has 18 years experience teaching a wide range of Australian taxation law courses at both undergraduate and postgraduate level including goods and services tax, fringe benefits tax, taxation of companies, tax administration and tax avoidance. Dale is currently teaching at the University of New South Wales and has also published over 70 articles on a wide range of areas of Australia’s taxation system. - Current at 29 May 2019

More by Dale BOCCABELLA

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• Extinguishment of tax attributes (eg losses) on death under Australia’s income tax is anomalous and inequitable - 01-September-2013
• Managing losses - Traps for the unwary paper - 18-May-2010
• Inconsistent treatment is hard to justify - 01-February-2002
• Tax practice: Ralph Report: retaining a work in progress advantage under the Ralph Report - 01-May-2000
• Cash flow/tax value method: platform for accruals taxation indelibly planted - 01-March-2000
• FCT v Rowe: will the High court overrule itself - 01-April-1996

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