Trust Housekeeping Year End 2022

If you are having difficulty paying your tax bill, please contact bookkeeping for small business experts so that they can negotiate a deferment or payment plan on your behalf with the ATO.

Trust Split Arrangements

A family trust is frequently the subject of a trust split. Allowing separate parts of the family group to have autonomous control of their own part of the trust fund is a common justification for 'splitting' the trust.

Melbourne bookkeeper said that according to the Tax Commissioner, the split will result in the creation of a new trust (due to the trustee's new personal obligations and the addition of new rights to property) and a capital gains tax event, which could result in a taxable capital gain.

TFN Reporting

Trustees of closely owned trusts have various additional reporting responsibilities in addition to the annual filing of the trust tax return. The Australian Taxation Office (ATO) is now conducting a review of trustees to ensure that they are complying with these requirements, including the requirement to file TFN reports for beneficiaries.

Where TFN Provided

Bookkeeper service provider said that trustees are required to provide a TFN report for each beneficiary who has provided their TFN to the trustee. The TFN report must be submitted by the end of the month after the end of the quarter in which the TFN was used. For example, if a beneficiary's TFN is received in April, the trustee must file a TFN report by the end of July.

Where TFN Not Provided

When a beneficiary fails to furnish a TFN, the trustee is compelled to withhold and pay tax to the ATO at a rate of 47 percent on payments made to the beneficiary. In addition, the trustee must provide an annual report detailing any payments withheld.

Trust Distributions

Timing of Resolutions

Bookkeeping Melbourne service providers said that by 30 June 2022, trustees (trustee company’ directors) must have considered and decided on the distributions they want to make (the trust deed may actually require this to be done prior). Trustees' decisions should be memorialised in writing, preferably by June 30, 2022.

If appropriate resolutions are not in place by June 30, 2022, the trust's taxable income may be assessed in the hands of a default beneficiary (if the trust deed allows it) or the trustee (in which case the highest marginal rate of tax would usually apply).

Anti-Avoidance and ‘Round Robin’ Trust Distributions

Melbourne bookkeeper said that the anti-avoidance rules prevent family trusts from distributing to other closely owned trusts in a 'round robin' fashion.

When trust revenue is dispersed to one or more additional trusts and then distributed back to the first trust, the regulations impose penalty rates of tax. Prior to July 1, 2019, trusts that made a family trust election were exempt from these regulations; however, this is no longer the case.

Distributions to Non-Resident Beneficiaries

Non-resident beneficiaries may be taxed in Australia on gains linked to foreign assets that would not have been taxed if the gains had been made directly by the beneficiary.

Bookkeeper service provider said that even if a resident discretionary trust makes a capital gain that is transferred to a non-resident beneficiary, even if the gain is not related to Taxable Australian Property (TAP), and even if the gain has a foreign source, the ATO expects the gain to be taxed in Australia. Because non-resident beneficiaries will be taxed at non-resident rates and may not be eligible for the full CGT discount, trustees must carefully examine this when deciding on distributions for trusts with a mix of resident and non-resident beneficiaries.

Bookkeeping Melbourne professionals said that the ATO's decisions do not take into account the possibility of double tax treaties being applied. Another factor to consider when determining how payments are likely to be taxed in the hands of non-resident beneficiaries is the source of funds.

Final Say

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