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Steps are taken to create an artificial difference between the trust income and taxable net income of a closely held trust with the primary motivation appearing to be the avoidance of tax. The steps may include: a. Amending or varying the trust deed definition of income or the trustee's powers to determine trust income b. The trustee taking steps for the principal purpose of reducing trust income c. The trustee relying on a power in the trust deed to determine that trust income is less than it would otherwise have been 2. The beneficiary who is made presently entitled to the trust income: a. paying little or no tax on the share of taxable net income included in its assessable income, or b. is a private company, with the arrangement designed to impose tax on the net income of the trust at the rate of 30%, while limiting any increase in the accumulated profits of the company so as to minimise future assessable income that arises from paying dividends out of company profits. 3. The trust retaining the economic benefit reflecting the artificial difference between the trust income and taxable net income of the trust. That benefit may subsequently be extracted in a form that is claimed to be tax-free (or subject to a reduced rate of tax) in the hands of the recipient (usually an individual related to the controlling mind).