Statements of distribution

65 Statement of distribution

Is the trust making the distribution a closely held trust?

There are reporting obligations that apply to certain distributions to trustee beneficiaries of a closely held trust, within the meaning of section 102UC of the ITAA 1936.

Failure to meet these reporting obligations may result in a liability for trustee beneficiary non-disclosure tax, currently imposed at a rate of 46.5%.

If you are making a distribution to another trust (a trustee beneficiary) you should read all the information in appendix 12 before answering this question as these reporting obligations may apply to you.

If you are not making a distribution to a trustee beneficiary or if after reading appendix 12 you do not meet the definition of a closely held trust, then print X in the No box at W.

Do not complete the Trustee Beneficiary Statement (TB Statement) Information section on the distribution statement.

If you print X in the Yes box at W you need to complete the beneficiary details (name and TFN for resident trustee beneficiaries and name and address for non-resident trustee beneficiaries) and the TB statement information.

Has the trust received an employment termination payment (ETP) or superannuation lump sum?

Include death benefit ETPs and superannuation lump sums on the distribution statement at B at the end of item 65, on page 15 of the tax return, at Income to which no beneficiary is presently entitled and in which no beneficiary has an indefeasible vested interest, and the trustee's share of credit for tax deducted.

The trustee is liable to pay the tax, if any, on these amounts. The amount of tax payable by the trustee depends on the components of the ETP or superannuation lump sum and the extent that the dependants of the deceased benefit from the estate. For more information on ETPs and superannuation lump sums see item 13 Superannuation lump sums and employment termination payments.

Has the trust received a listed investment company (LIC) capital gain amount?

If the following persons or entities are beneficiaries and the trust claimed a deduction in respect of a LIC capital gain amount, the trust must advise these beneficiaries of their share of the deduction claimed by the trust for the LIC capital gain amount:

• non-resident individual
• trustee of a trust
• trustee of a superannuation entity
• company (including a life insurance company)
• partnership.

Is a beneficiary presently entitled to a share of the income of a trust?

If resident beneficiaries are presently entitled to a share of the income of a trust and are not under any legal disability, it is the beneficiaries, who are assessed. The beneficiaries are assessed on that same proportional share of the net income of the trust as the share of the income of the trust estate to which they are presently entitled.

A beneficiary is deemed to be presently entitled to income of a trust if they have an 'indefeasible vested interest' in that income. An indefeasible interest is simply one that cannot be defeased or brought to an end or varied by someone else. A vested interest is one that presently exists. However, it can be either a present right or one that can be enjoyed in the future.

Is there income of the trust estate to which no beneficiary is presently entitled?

Include at the end of item 65, on page 15 of the tax return, at Income to which no beneficiary is presently entitled that part of the net income of the trust at item 26 Total net income or loss that has not been assessed to a beneficiary, or assessed to the trustee on behalf of a beneficiary:

• who is presently entitled to a share of the income of the trust but is not a resident at the end of the income year
• who is presently entitled to a share of the income of the trust but is under a legal disability.

The trustee also prints X in the Yes box at Is any tax payable by the trustee? on page 2 of the trust tax return.

Except for deceased estates in the year in which the deceased died and the following two income years - which are taxed at the general individual rates - a trustee is assessable under section 99A of the ITAA 1936 and is liable to pay tax at the maximum rate of personal income tax on income to which no beneficiary is presently entitled. The Commissioner has a discretion not to apply this provision to a trust that:

• resulted from the will or intestacy of a deceased person
• consists of property either of a bankrupt vested in the official receiver in bankruptcy or that is being administered under Part XI of the Bankruptcy Act 1966 (as amended).
• consists of property that was transferred to the trustee for the benefit of the beneficiary
• • by way of, or in satisfaction of a claim for, damages for loss of parental support, personal injury, disease, or physical or mental impairment
  • by way of workers or criminal injury compensation
  • directly as a result of the death of a person and from the proceeds of a life assurance policy, a superannuation fund or an employer of the deceased person
  • out of a public fund established and maintained exclusively for the relief of persons in necessitous circumstances
  • as a result of a family breakdown.
   

If this discretion is exercised, the trustee is not liable to pay tax at the maximum rate of personal income tax on the income to which no beneficiary is presently entitled. Instead, the trustee pays tax at progressive or shaded-in rates. For trusts, other than for the first three years for deceased estates which are taxed at the general individual rates, these shaded-in rates are shown in table 9.

Table 9
Share of net income ($)	Tax on column 1 ($)	% on excess (marginal rate)
416	Nil	50
594	89	15*
35,000	5,250	30
80,000	18,750	38
180,000	56,750	45

*Income in the following range $595-$35,000 is taxed at a flat rate of 15%.

If you would like the Commissioner's discretion to be exercised, submit full details in support of the request, together with:

1. details of the balance sheet capital accounts
   
2. if shares are held in private companies and special rights attach directly or indirectly to those shares, a statement showing the name of the company, the class and paid-up value of the shares, details of the special rights, and whether those rights have been exercised during the year
   
3. if a loan has been made to or by the trust, a statement showing the nature of the debt, the terms of the loan and the borrower's or lender's full name, address and family relationship, if any, to the beneficiaries. To obtain the Commissioner's discretion, this information need not be furnished for public securities, debentures in public companies and loans made in normal commercial transactions where the parties are at arm's length. If relatives of the beneficiaries or other persons not at arm's length have made loans to a private company in which the trust holds shares, or to a partnership in which the trustee is a partner, full details must also be given for such loans
   
4. if a person, other than in a purely commercial transaction at arm's length, has directly or indirectly transferred money or property to the trust, conferred benefits on the trust or conferred special privileges on the property of the trust, the full name and address of the person and the family relationship, if any, of that person to the beneficiaries
   
5. the names of any other trusts to which the person in 3 or 4 has contributed in the ways mentioned in those sub-paragraphs or in which the beneficiaries of the trust lodging this tax return are interested
   
6. details of property which has been transferred to a trust by a relative of the beneficiaries, and income from that property which must or may be used to pay for that property.

You do not need to provide the information required under 2 to 6 if it has already been sent in an application for exercise of the Commissioner's discretion for income included on an earlier income year's tax return. However, you must provide a statement on a separate sheet of paper advising whether or not any material changes have occurred since the information was furnished if the discretion is exercised for any income on the current tax return.

Attach the statement to the tax return and print X in the Yes box at Have you attached any 'other attachments'? at the top of page 1 of the tax return.

Capital gains reduced by the CGT discount and/or the small business 50% reduction where no beneficiary is presently entitled

If the trustee is assessable under section 99A of the ITAA 1936 on some or all of the net income of the trust, capital gains included in that part of the trust's net income are not eligible for the CGT discount and the small business 50% reduction (see section 115-225 of the ITAA 1997).

If the trustee is assessable under section 99A of the ITAA 1936 on some or all of the net income of the trust and the amount on which the trustee is assessed includes a capital gain to which either the CGT discount or the small business 50% reduction has been applied, work out the amount assessable to the trustee under section 99A as if the part attributable to the capital gain was double the amount it actually is.

If the trustee is assessable under section 99A of the ITAA 1936 on some or all of the net income of the trust and the amount on which the trustee is assessed includes a capital gain to which both the CGT discount and the small business 50% reduction have been applied, work out the amount assessable to the trustee under section 99A as if the part attributable to the capital gain was four times the amount it actually is.

Provide a statement on a separate sheet of paper showing details of the amount assessable under section 99A using the above method. Attach the statement to the tax return and print X in the Yes box at Have you attached any 'other attachments'? at the top of page 1 of the tax return.

Is the trust a deceased estate?

For the first three trust tax returns of a trust created as a result of the death of a person, the income to which no beneficiary is presently entitled is taxed to the trustee at general individual tax rates, with the benefit of the full tax-free threshold of $6,000.

Thereafter, this income reverts to being taxed at rates of tax as shown in table 13.1, if the Commissioner's discretion is exercised.

If the Commissioner's discretion is to be exercised for a deceased estate, provide the information about the deceased person as described in 2 to 6.

Completing item 65

The total of the income at N, A, B, F, G and H on this statement equals the amount at item 26 Total net income or loss, except in the case of certain ETPs, as covered in item 13 Superannuation lump sums and employment termination payments and in the case where a beneficiary's or a trustee's share of franking credits at N has been reduced because of an entitlement to a foreign income tax offset.

If part of a distribution is not taxable to either the trustee or a beneficiary, for example, the distribution to a non-resident beneficiary includes dividends, interest or royalties on which withholding tax has been paid or withheld, franked dividends, or a distribution to a foreign resident which requires an Australian managed investment trust to withhold an amount, attach a statement highlighting this, including the information outlined at Non-resident beneficiaries.

A trust cannot distribute an overall trust loss.

Transitional TFN reporting arrangements for closely held trusts

From 1 July 2010, closely held trusts, including family trusts, may have to report the TFN, name, date of birth and postal address details of beneficiaries under an extension of the TFN withholding rules.

Transitional arrangements have been developed to facilitate a smooth transition to the TFN withholding system for closely held trusts.

Trustees will be able to meet their TFN reporting obligations for the 2011 income year by lodging their 2010 trust income tax return.

Beneficiary TFN, full name, address and date of birth details (for individuals) should be reported on the statement of distribution of the 2010 trust income tax return, even if the beneficiary did not receive a payment in 2010. Where the beneficiary did not receive a payment, report a zero distribution amount at the non-primary production share of income label (statement of distribution label B).

If the trustee is not required to lodge a 2010 trust income tax return, or receives a TFN from a beneficiary after lodging their 2010 trust tax return, they must report those beneficiary details in a TFN report for the fourth quarter of the year. For normal balancing trusts this will be due on 31 July 2011.

If the number of beneficiaries exceeds five

For paper tax returns, if there are more than five beneficiaries list the details at the appropriate labels in the distribution statement for four of the beneficiaries. The distributions to the remainder must be summarised and shown against the labels underneath the Beneficiary 5 name and address box.

In the Beneficiary 5 name and address details print SUMMARY and show the trustee's address instead of the beneficiary's address. Show summarised totals for the additional beneficiaries against the labels underneath.

Write the details for each additional beneficiary on separate sheets of paper, in the same format as the statement of distribution. If any of the additional beneficiaries are trustee beneficiaries and the trust is required to make a TB statement, include the additional TB Statement information in the attachment. Attach the statements to the tax return and print X in the Yes box at Have you attached any 'other attachments'? at the top of page 1 of the tax return.

Beneficiary details

Beneficiary 1, Beneficiary 2, Beneficiary 3, Beneficiary 4, Beneficiary 5

Show the full name and TFN of each beneficiary entitled, presently entitled or having an indefeasible and vested interest. If the TFN is not shown, show the beneficiary's address for the service of notices. If the beneficiary is a trustee of another trust, show the name and TFN of the trust.

If you are required to make a TB statement, provide the following details for each trustee beneficiary:

• for resident trustee beneficiaries, the name and TFN of the trustee beneficiary
• for non-resident trustee beneficiaries, the name and address of the trustee beneficiary.

Date of birth

If the beneficiary is under 18 years of age at 30 June 2010, show their date of birth.

Assessment calculation code V

Insert an assessment calculation code from appendix 13 for each beneficiary presently entitled to a share of the income of the trust, and also for income to which no beneficiary is presently entitled and in which no beneficiary has an indefeasible vested interest.

Bankrupt estates are lodged under assessment calculation code 37.

Credit for tax withheld - foreign resident withholding L

Show each beneficiary's share of credit for tax withheld where income is subject to foreign resident withholding. Show whole dollars only. The total of the amounts at L must equal the total amount of credit shown on the tax return at U item 6 and U item 8.

Australian franking credits from a New Zealand company N

If the resident beneficiaries are presently entitled to a share of the income of the trust and are not under any legal disability, the beneficiaries, not the trustee, are assessed on their share of the net income of the trust. For more information on present entitlement, see Is a beneficiary presently entitled to a share of the income of a trust?

Include at N the beneficiary's share of the Australian franking credit received from a New Zealand company, including any amounts received through another trust or a partnership. The amount at N is not necessarily the amount that can be claimed by each beneficiary.

If the beneficiary is under a legal disability or it is income to which no beneficiary is presently entitled and in which no beneficiary has an indefeasible vested interest, the trustee will be assessed (see above). In these circumstances, include at N the amount of Australian franking credits attached to a New Zealand dividend allowed to the trustee. Under section 220-405 of the ITAA 1997, the Australian franking credits are reduced by the relevant part of the supplementary dividend paid by the New Zealand company if:

• the supplementary dividend was paid in connection with the franked dividend
• the beneficiary under a legal disability or trustee is entitled to a foreign income tax offset because the franked dividend is included in their assessable income. For more information, see appendix 1.

Share of income A and B

Show each beneficiary's share of income in whole dollars only, separated into primary production income and non-primary production income. If a loss is distributed, print L in the box after the amount.

A loss is only shown for a component (that is, primary production or non-primary production) of an overall trust distribution. The trust cannot distribute an overall trust loss.

Credit for tax withheld where ABN not quoted C

Show each beneficiary's share of credit for tax withheld where an ABN was not quoted. Show whole dollars only. The total of C amounts for each completed distribution statement equals the sum of any credit claimed at:

• T Tax withheld where ABN not quoted item 6
• C Share of credit for tax withheld where ABN not quoted item 8.

Franking credit D

Show each beneficiary's share of franking credits for franked dividends. The total of D amounts for each completed distribution statement must equal the sum of franking credits claimed at:

• D Share of franking credit from franked dividends item 8
• M Franking credit item 12.

TFN amount withheld E

Show each beneficiary's share of credit for amounts withheld from payments of interest, dividends and unit trust distributions by investment bodies because the recipient did not quote a TFN. The total of E amounts for each completed distribution statement must equal the sum of TFN amounts withheld on interest, dividends and unit trust distributions at:

• E Share of credit for TFN amounts withheld from interest, dividends and unit trust distributions item 8
• I TFN amounts withheld from gross interest item 11
• N TFN amounts withheld from dividends item 12.

If the trust has no net income, the beneficiaries do not have a share of credit for the TFN amounts withheld. Instead, show the sum of the TFN amounts at E under Income to which no beneficiary is presently entitled.

Net capital gain F

Show each beneficiary's share of net capital gain in whole dollars only. The total F amounts from each distribution statement must equal the amount at A Net capital gain item 21. To complete their own tax returns and meet their capital gains tax obligations, beneficiaries need the following information:

• a dissection of the net capital gain distributed by the trust for the income year to the extent that it comprises an amount attributable to the following:
• • capital gains from collectables, for each of the following methods of calculation:
  • • indexation
    • CGT discount
    • other method
     
  • capital gains to which the small business 50% active asset reduction was applied, for each of the following methods of calculation:
  • • indexation
    • CGT discount
    • other method
     
  • all other capital gains, for each of the following methods of calculation:
  • • indexation
    • CGT discount
    • other method
     
   
• details of any non-assessable payment made in the income year in respect of an interest in the trust (CGT event E4 section 104-70 of the ITAA 1997). The details should indicate the extent to which the payment is attributable to each of the following:
• • tax-exempted amounts (subsection 104-71(1) of the ITAA 1997)
  • tax-free amounts (subsection 104-71(3) of the ITAA 1997)
  • CGT concession amounts (subsection 104-71(4) of the ITAA 1997)
  • tax-deferred amounts, associated with the small business 50% active asset reduction, frozen indexation, building allowance and accounting difference in income.
   

To help a trustee record the information required under 1, see worksheet 5.

Attributed foreign income G

Show each beneficiary's share of attributed foreign income in whole dollars only. The total G amounts for each completed distribution statement must equal the sum of any attributed foreign income shown at item 22 Attributed foreign income on the trust tax return.

Other assessable foreign source income H

Show each beneficiary's share of other assessable net foreign source income in whole dollars only. The total of H amounts for each completed distribution statement must equal the amount of net foreign source income shown at V Net item 23 on the trust tax return.

Foreign income tax offsets I

Show each beneficiary's share of foreign income tax offsets. The total of I amounts for each completed distribution statement must equal the amount of foreign income tax offsets shown at ZForeign income tax offset item 23 on the trust tax return.

Share of National Rental Affordability Scheme tax offset R

Show each beneficiary's share of the NRAS tax offset. The total of the amounts shown at R for each completed distribution statement must equal the amount of NRAS tax offset entitlement shown at F item 62 on the trust tax return. Include cents.