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Do you need to make a TB statement?

Find out if you need to make a Trustee beneficiary statement.

Last updated 14 November 2019

If you're a trustee of a closely held trust (that is not an excluded trust), you must make a correct TB statement for an income year if:

  • a share of the trust's net income is included in the assessable income of a trustee beneficiary (under section 97 of the Income Tax Assessment Act 1936 (ITAA 1936)), and
  • the share includes an untaxed part.

You must also make a TB statement where a trustee beneficiary is presently entitled at the end of the income year to a share of a tax-preferred amount of the trust.

If you fail to make a correct TB statement in respect of a beneficiary when required, you're liable to pay trustee beneficiary non-disclosure tax on the untaxed part of the beneficiary's share of net income

If you fail to report a trustee beneficiary's entitlement to a tax-preferred amount, you may be guilty of an offence under section 8C of the Taxation Administration Act 1953.

You don't have to make a TB statement if:

  • the closely held trust  
    • has a valid family trust election in force
    • has a valid interposed entity election in force
    • forms part of a 'family group'
  • you're within a class of trustees that we've determined by legislative instrument is not required to do so.

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Trustee beneficiary

A trustee beneficiary is a beneficiary of a trust in its capacity as trustee of another trust.

Closely held trusts

A trust is a closely held trust if it:

  • is a discretionary trust, or
  • has up to 20 individuals who, between them, directly or indirectly, and for their own benefit, have fixed entitlements to a 75% or more share of the income or a 75% or more share of the capital of the trust ('the 20/75 test').

However, a trust is not a closely held trust if it is an excluded trust.

Excluded trusts

Broadly, a trust will be an excluded trust if it is a:

  • complying superannuation fund
  • complying approved deposit fund
  • pooled superannuation trust
  • deceased estate (up until the end of the year of income in which the fifth anniversary of the death of the individual occurs)
  • fixed trust that is a unit trust where all of the beneficiaries are entities exempt from income tax, and have fixed entitlements to all of the income and capital of the trust
  • unit trust whose units are listed on the stock market operated by ASX Limited.

Whether or not a trust is an excluded trust is considered in terms of the trust itself and not its beneficiaries.

The 20/75 test

An individual and all of their relatives are taken to be one individual for the purposes of the 20/75 test.

Beneficiaries that are trustees of discretionary trusts

For the purposes of the 20/75 test, a trustee beneficiary that is a trustee of a discretionary trust will be taken to be an individual, and to hold the fixed entitlement for its own benefit, if:

  • it holds a fixed entitlement to a share of the income or capital of the trust, and
  • no person holds that fixed entitlement directly or indirectly through the discretionary trust.

Example: Beneficiaries that are trustees of discretionary trusts

'Trust A' is a unit trust. All three beneficiaries of Trust A are trustees of discretionary trusts. The trustees of two of the discretionary trusts each hold a fixed entitlement to a 50% share of the income of Trust A. The trustee of the third discretionary trust holds a fixed entitlement to a 100% share of the capital of Trust A. No person holds a fixed entitlement, directly or indirectly, through any of the discretionary trusts.

The trustee beneficiaries are therefore treated as individuals for the purposes of the 20/75 test.

Diagram showing Test A, the Test trust, is a unit trust. Discretionary trust 1 holds a fixed entitlement to a 50% share of the income of Trust A. Discretionary trust 2 holds a fixed entitlement to a 50% share of the income of Trust A. Discretionary trust 3 holds a fixed entitlement to a 100% share of the capital of Trust A.
Trust A satisfies the 20/75 test, and is a closely held trust for the purposes of the trustee beneficiary reporting rules, on two grounds:

  • Twenty or fewer individuals have between them fixed entitlements to a 75% or more share of the income of the trust.
  • Twenty or fewer individuals have between them fixed entitlements to a 75% or more share of the capital of the trust.

Either of these grounds is sufficient for Trust A to satisfy the 20/75 test.

End of example

Untaxed part of a share of the net income

An 'untaxed part' of a share of net income is the relevant share of the closely held trust's net income less any part that has been taxed under:

  • subsection 98(4) of the ITAA 1936 (about certain non-resident trustee beneficiaries)
  • Subdivision 12-H in Schedule 1 of the Taxation Administration Act 1953 (about distributions of managed investment trust income)
  • Division 6D of the ITAA 1936 (trustee beneficiary non-disclosure tax).

Example: Untaxed part of a share of the net income

'Trust A' is a closely held trust. It has two trustee beneficiaries, the trustees of 'Trust X' and 'Trust Y'.

The trustee of Trust X is a resident and their share of Trust A's net income is $3,000. The trustee of Trust Y is a non-resident and their share of Trust A's net income is $10,000, all of which is attributable to Australian sources.

Diagram showing Trust X, a resident, having a share of $3,000 of Trust A's net income and Trust Y, a non-resident, having $10,000 of Trust A's net income.

The trustee of Trust A is assessed and liable to pay tax on the trustee of Trust Y's share of the net income ($10,000), under subsection 98(4) of the ITAA 1936. The trustee of Trust A does not need to make a TB statement about the trustee of Trust Y or its share of Trust A's net income, because the whole of Trust Y's share has been taxed under subsection 98(4) of the ITAA 1936 – it's excluded from the trustee beneficiary reporting rules.

The trustee of Trust A must make a TB statement about the trustee of Trust X and their share of Trust A's net income ($3,000) – that is, the untaxed part of the share of the net income of Trust A.

End of example

Tax-preferred amount

A tax-preferred amount is:

  • income of the trust for trust law purposes that is not included in the trust's assessable income in working out its net income
  • capital of the trust.

Examples of tax-preferred amounts include:

  • capital gains that are not included in the trust's assessable income (for example, capital gains made on pre-capital gains tax assets and the discount component of any discount capital gains)
  • returns of trust capital to unit holders or beneficiaries
  • non-assessable non-exempt income
  • exempt income
  • the excess of trust law income over a trust's net (or tax law) income.

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