These instructions will help you complete the Trust tax return 2017. They are not a guide to income tax law. You may need to refer to other publications.
When we say you or your business in these instructions, we mean either you as the trust that conducts a business, or you as the registered tax agent or trustee responsible for completing the tax return.
These instructions contain abbreviations for names or technical terms. Each term is spelt out in full the first time it is used and there is a list of abbreviations.
What’s new?
Net medical expenses tax offset
The phase out of this offset continues. For 2016–17, expenses you can claim under this offset are now restricted to disability aids, attendant care and aged care. For more information, see Question T5 in the Individual tax return instructions supplement 2017.
Exploration development incentive
The Exploration development incentive (EDI) encourages shareholder investment in small exploration companies undertaking greenfields mineral exploration in Australia.
The scheme enables eligible exploration companies to give up a portion of their tax losses from greenfields exploration to create and issue exploration credits to some of their shareholders. Certain Australian resident investors will be entitled to a refundable tax offset for the exploration credits that they receive,
Exploration credit tax offsets are shown at items 51 and 55.
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Expanded access to small business concessions
From 1 July 2016, the small business entity aggregated turnover threshold for a range of small business concessions increased from $2 million to $10 million.
The $10 million aggregated turnover threshold applies to most of the small business concessions, except for:
- the small business income tax offset, which is available to businesses with aggregated turnover of less than $5 million from 1 July 2016 (claimed by individual beneficiaries)
- capital gains tax (CGT) concessions for small business, where the aggregated turnover threshold of $2 million continues to apply.
- The aggregated turnover threshold for the FBT concessions increases to $10 million from 1 April 2017.
Small business income tax offset
A beneficiary who is an individual may be entitled to a tax offset on the tax payable on their share of net small business income earned by a trust that is a small business entity.
From the 2016–17 income year:
- the small business income tax offset increased to 8%, previously 5%, with a limit of $1,000 each year
- the offset applies to small businesses with aggregated turnover of less than $5 million (previously $2 million).
Early stage venture capital limited partnership tax offset
From 1 July 2016, a limited partner of an early stage venture capital limited partnership (ESVCLP) may qualify for:
- a non-refundable carry forward tax offset of up to 10% of their contribution to an ESVCLP. The ESVCLP must have become unconditionally registered on or after 7 December 2015. This includes an ESVCLP that was conditionally registered before this time and then became unconditionally registered on or after 7 December 2015.
- a tax exemption for part of the capital gain or income from the disposal of the investments that accrued to the end of the period ending six months after the end of an income year in which the investee’s value has first exceeded $250 million.
The ESVCLP tax offset is shown at items 52 and 55.
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Early stage investor tax incentives
From 1 July 2016, investors that acquire newly issued shares in a qualifying early stage innovation company may be eligible for:
- a tax offset equal to 20% of the amount paid for the shares. This tax offset is capped at a maximum amount of $200,000 for each income year for the investor and their affiliates combined. The offset is not refundable, however it can be carried forward to the next income year.
- a modified CGT treatment under which the investor can disregard any capital gains made on the shares that have been continuously held for between one and ten years. Any capital losses on the shares held for less than ten years must be disregarded.
The early stage investor tax offset is shown at items 52 and 55.
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A new tax system for managed investment trusts
The Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016External Link(the Act) introduces a new tax system for managed investment trusts (MITs).
A trustee may elect to apply the new rules for income years starting on or after 1 July 2016. However, in certain circumstances, a trustee may elect to apply the new rules from 1 July 2015.
The new system:
- allows eligible MITs to use an attribution method of taxation (in lieu of the existing present entitlement to income method)
- includes a rule to allow eligible MITs to carry forward under- and over-distributions into the next income year, without adverse taxation consequences
- treats as fixed trusts those MITs that meet eligibility requirements
- allows unit holders to make, in certain circumstances, adjustments (including upward) to the cost base of their unit holdings to eliminate double taxation that may otherwise arise
- introduces an arm’s length rule that aims to ensure that related entities undertake transactions between one another in a manner that reflects commercial dealings
- amends the 20% tracing rule for public unit trusts so it does not apply to super funds and exempt entities that are entitled to a refund of excess imputation credits.
Corporate unit trusts and public trading trusts
For income years starting on or after 1 July 2016, the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016External Link:
- repeals the corporate unit trust rules in Division 6B of Part III of the Income Tax Act 1936 (ITAA 1936). This means that trusts formerly subject to Division 6B will no longer be 'corporate unit trusts'. Such trusts may either continue to be taxed similarly to companies if they are a 'public trading trust' under Division 6C (and should lodge a company tax return) or be taxed as a trust (and should lodge a trust tax return).
- modifies the 20% tracing rule in Division 6C of the ITAA 1936. This means that a trust will no longer be a public unit trust for the purposes of Division 6C of the ITAA 1936, solely because 20% or more of its membership interests are held by complying superannuation entities and/or tax exempt entities that are eligible for a refund of franking credits.
- introduces transitional rules to allow trusts that cease to be subject to Divisions 6B and 6C of the ITAA 1936 to deal with their franking accounts in respect of certain events that happen on or before 30 June 2018. For example, distributions of profits that arose whilst the trust was a corporate unit trust or public trading trust may be franked where the distribution is made on or before 30 June 2018.
Increasing access to company losses
On 1 March 2019, legislation was enacted that will supplement the current ‘same business test’ for trust losses with a more flexible 'similar business test'. The new test will expand access to past year losses when a listed widely held trust enters into new transactions or business activities.
The similar business test will allow a listed widely held trust to access losses following a change in ownership where its business, while not the same, is similar having regard to:
- the extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income,
- the extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income,
- the identity of its current business and the identity of its former business, and
- the extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services or marketing or organisational methods of the former business.
As a test for accessing past year losses, the 'similar business test' will only be available for losses made in income years starting on or after 1 July 2015.
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
This measure takes effect in relation to income years starting on or after 1 July 2015. For more information, go to ato.gov.au/New-legislation
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Significant global entity (SGE)
The significant global entity (SGE) concept is used to give clarity to taxpayers about whether they are within the scope of the measures to which the definition applies.
The concept of SGE was introduced as part of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 legislation which contains a package of measures announced as part of the 2015–16 BudgetExternal Link. These measures focus on combating multinational tax avoidance.
An entity is an SGE if it is:
- a global parent entity with an annual global income of A$1 billion or more, or
- a member of a group of entities that are consolidated for accounting purposes as a single group and one of the other members of the group is a global parent entity whose annual global income is A$1 billion or more.
An SGE can be an entity in a group that only has operations in Australia, including those that are privately owned.
To assist in identifying SGEs, from the 2016–17 income year and going forward, taxpayers will be required to self-assess themselves under the definition of a SGE and notify the tax office on their annual trust tax return at 'Status of business' (item 2, G1).
The SGE concept is part of the following measures:
- The Multinational Anti-Avoidance Law (MAAL)
- Country-by-Country (CbC) Reporting
- Increased administrative penalties for SGEs
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The Multinational Anti-Avoidance Law (MAAL)
The Multinational Anti-Avoidance Law (MAAL) is part of the government's efforts to combat tax avoidance by multinational companies operating in Australia. The MAAL has been introduced to ensure that multinationals pay their fair share of tax on the profits earned in Australia. It is aimed at SGEs that enter into artificial arrangements to avoid taxation in Australia (or elsewhere) when supplying goods or services to Australian customers.
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Country-by-Country (CbC) reporting
Country-by-Country (CbC) reporting is part of a broader suite of international measures aimed at combating tax avoidance through more comprehensive information being provided to the ATO to better conduct risk assessments associated with transfer pricing.
The measure takes effect from income years commencing on, or after, 1 January 2016. It requires SGEs to supply the ATO with three statements which will provide a clear overview of its global and Australian operations. This information will be shared with tax authorities in the other jurisdictions in which the group operates. The measure also contains revised standards for transfer pricing documentation.
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International Dealings Schedule (IDS)
Entities subject to CbC reporting are generally required to lodge a local file with the tax office as a part of their obligations under the regime. An administrative arrangement is in place with respect to such entities: taxpayers may be exempt from completing labels 2 to 17 of the IDS if they lodge Part A of the local file at the same time as their income tax return.
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Increasing administrative penalties for SGEs
On 3 May 2016, the government announced the 'Tax integrity package – increasing administrative penalties for significant global entities' measure. This measure applies to conduct occurring from 1 July 2017.
Administrative penalties for statement will be doubled. This increases the penalties imposed on SGEs that do not take reasonable care, take a tax position that is not reasonably arguable, or fail to provide documents when required and the Commissioner determines the liability without the document.
Failure to lodge on time (FTL) penalties for SGEs will be increased. The base penalty amount will be multiplied by 500 if the entity concerned is an SGE.