Family Trust Elections and the Extended Family
When the trust loss provisions were first introduced as an anti-avoidance regime, the solution to avoid being caught was to make a family trust election. If you made an election, most of the potential problems could be alleviated.
The problem is that the family trust election creates a family “tax” group, which does not necessarily reflect the family group: in-laws can become outlaws over time and the ex-spouse can become an outlaw too.
So any plan to pass control of a trust asset to a member of the extended family outside the family group covered by the elections can trigger a 46.50% tax liability on the value of that asset. Not a good look, particularly when there may be no cash available in the trust to pay for it!