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Business and professional items – items 37 to 56

Last updated 26 May 2021

You must complete the items in this section of the tax return (items 37 to 56) to the extent they apply to the trust. Even trusts which are not carrying on a business should complete the relevant items in this section.

In this section:

37 Business name of main business

The business name of the main business activity should be consistent from year to year, except in the year of a name change or if it is no longer the main business.

If the business name is legally changed, send written advice of the change to us when the change is made. Show the current business name on the tax return.

38 Business address of main business

Show the street address of the main business. This is the place where most of the business decisions are made. Ensure that you include the postcode at A.

39 Opening stock

Show at C the total value of all trading stock on hand at the beginning of the income year or accounting period for which the trust tax return is being prepared. The amount shown by the trust at C is the calculated value for income tax purposes under section 70–40, or for small business entities using the simplified trading stock rules subsection 328-295(1) of the ITAA 1997. The opening value of an item of stock must equal its closing value in the previous year.

If you did not have any trading stock in the previous year, the value of trading stock at the start of the year is zero. This might occur:

  • in the case of a new business
  • in the first year you have trading stock, or
  • where the trading stock rules for small business entities cease to apply, either because the entity is no longer eligible to be a small business entity or because the entity chooses to account for changes to trading stock.

Include motor vehicle floor plan stock and work in progress of manufactured goods.

Do not include any amount that represents opening stock of a business that started operations during the income year. Show this amount at Cost of sales at E item 5.

40 Purchases and other costs

Show at B the cost of direct materials used for manufacture, sale or exchange in deriving the gross proceeds or earnings of the business.

Former STS taxpayers still using the STS accounting method

If the trust is eligible and has chosen to continue using the STS accounting method, only show at B purchases and other costs which the trust has paid. For more information, see Appendix 13.

41 Closing stock

If the trust is a small business entity choosing to use the simplified trading stock rules, see the information for small business entities below. Otherwise, go to All other businesses.

Small business entities

Small business entities only need to account for changes in the value of trading stock if the value of stock on hand at the start of the income year and a reasonable estimate of the value of stock on hand at the end of the income year varies by more than $5,000.

For more information, see Simplified trading stock rules.

Small business entities who wish to do so can still conduct a stocktake and account for changes in the value of trading stock.

If the difference between the value of opening stock and a reasonable estimate of closing stock is:

  • more than $5,000 the trust must account for the change in the value of trading stock, go to step 2
  • $5,000 or less, go to step 1.

Step 1

If the difference referred to above is $5,000 or less and the trust chooses not to account for this difference, the closing stock value at D is the same as the value at C item 39. Do not put the reasonable estimate at D.

Print in the CODE box at the right of D the code letter from table 7 that matches the code the trust used to value closing stock in the previous year.

Table 7

Code

Valuation method

C

Cost

M

Market selling value

R

Replacement value

If this is the trust’s first year in business the value of the closing stock will be zero. Print C in the CODE box.

Step 2

If the difference referred to above is more than $5,000 or the trust chooses to account for the difference in trading stock, the closing stock values must be brought to account under section 70-35 of the ITAA 1997. See the information for All other businesses for instructions on how to calculate the value of closing stock.

The trust must include in the closing stock value at D the value of all stock on hand, regardless of whether the trust has paid for the stock.

All other businesses

Show at D the total value of all trading stock on hand at the end of the income year or accounting period for which the trust tax return is being prepared. The amount at D is the value calculated for income tax purposes under section 70-45 of the ITAA 1997.

If the trust is registered for GST, the value of closing stock (other than items the supply of which was not a taxable supply) should not include an amount equal to the input tax credit that would arise if the trust had acquired the item solely for business purposes at the end of the income year. Input tax credits do not arise for some items of trading stock, such as shares.

Include motor vehicle floor plan stock and work in progress of manufactured goods.

Do not include any amount for closing stock of a business that ceased operations during the income year, instead, show this amount at item 5 Total business income.

Print in the CODE box the code from Table 7 indicating the method used to value closing stock for income tax purposes. If you use more than one method, use the code for the method representing the greatest value.

You can use different methods to value the same item of trading stock in different income years, and you can value similar items using different methods in the same income year.

However, the opening value of an item in a particular income year must equal the closing value for that item in the previous income year. The trust cannot reduce the value of stock on hand by creating reserves to offset falls in the value of stock or any other factors. Keep records showing how each item was valued.

The trust may elect to value an item of trading stock below the lowest value calculated by any of these methods because of obsolescence or other special circumstances. The value in the election must be reasonable. If you elect to value an item of trading stock below cost, market selling value and replacement value, see item 48 Trading stock election.

If you include incorrect trading stock information on the tax return, advise us by submitting a full statement of the facts, accompanied by a reconciliation of the value of stock as returned for each income year with the values permissible under the law.

Trusts engaged in manufacturing include the value of partly manufactured goods as part of their stock and materials on hand at the end of the income year.

For information on the circumstances in which packaging items held by a manufacturer, wholesaler or retailer are trading stock as defined in section 70-10 of the ITAA 1997, see TR 98/7 Income tax: whether packaging items (i.e., containers, labels, etc.) held by a manufacturer, wholesaler or retailer are trading stock.

42 Trade debtors

Show at E the total amounts owing to the trust at year end for goods and services provided during the income year, that is, current trade debtors. Include this amount at item 33 All current assets.

43 Trade creditors

Show at H the total amounts owed by the trust at year end for goods and services received during the income year, that is, current trade creditors. Include this amount at item 35 All current liabilities.

44 Total salary and wage expenses

Show at L the total salary, wages and other labour costs actually paid or payable to people employed in the trust’s business. However, exclude those costs for private domestic assistance or which form part of capital expenditure, as they are not deductible.

You can only claim a deduction for a payment made or liability incurred by a trust to an associated person, principal, agent, related entity or associate entity if it is incurred in producing assessable income and we are satisfied that the amount is reasonable.

These expenses include any salary and wage component shown in Cost of sales at E item 5. This includes:

  • allowances
  • bonuses
  • casual labour
  • retainers and commissions paid to people who received a retainer
  • workers’ compensation paid through the payroll
  • direct and indirect labour costs
  • directors’ fees
  • holiday pay
  • locums
  • long service leave
  • lump sum payments
  • other employee benefits
  • overtime
  • payments under an incentive or profit-sharing scheme
  • retiring allowances
  • sick pay.

Include here and at item 5 Payments to associated persons any salary or wages paid to an associated person, principal, agent, related entity or associate entity.

However, these expenses do not include:

  • agency fees
  • contract payments
  • sub-contract payments
  • service fees
  • superannuation
  • management fees
  • consultant fees.

You cannot deduct salary and wage expenses where you have not complied with your pay as you go withholding obligations. See Removing tax deductibility of non-compliant payments.

Print in the CODE box the code from table 8 that shows where you predominantly reported salary and wage expenses.

Table 8

Salary and wages wholly or predominantly reported in

Code

the expense component of Cost of sales

C

All other expenses

A

the expense component of both Cost of sales and All other expenses

B

neither Cost of sales nor All other expenses

O

For more information about paying salary and wages in cryptocurrency, see Tax treatment of cryptocurrencies.

45 Payments to associated persons

Show at M the amounts, including salaries, wages, commissions, superannuation contributions or allowances, paid to the trustee's relatives or partnerships in which the relative of the trustee is a partner.

Also include the amounts of salaries and wages paid to an associated person, relative, principal, agent, related entity or associate entity at item 44 Total salary and wage expenses.

Record keeping

Excessive payments to a relative or other related entity may not be deductible; see section 26-35 of the ITAA 1997. Keep a record of the following to establish the reasonableness of remuneration:

  • full name of relative or other related entity
  • relationship
  • age, if under 18 years old
  • nature of duties performed
  • hours worked
  • total remuneration
  • salaries or wages claimed as deductions
  • other amounts paid, for example retiring gratuities, bonuses and commissions.

For more information about paying salary and wages in cryptocurrency, see Tax treatment of cryptocurrencies.

46 Fringe benefit employee contributions

Show at T all payments the trust has received from recipients of fringe benefits.

Employee contributions form part of the employer’s or associate’s assessable income in situations where employees make payments for fringe benefits they have received.

47 Unpaid present entitlement to a private company

Show at Y any amounts of the income of the trust from this year or a previous year of income to which a private company is entitled, and that remain unpaid by the lodgment day. If the amount is greater than zero, print D in the CODE box at the right of Y where, during the income year, the trustee of the trust estate:

  • made a payment that is attributable to an unrealised gain that discharged or reduced a present entitlement
  • made a loan
  • forgave a debt

in favour of a shareholder (or an associate of a shareholder) of a private company with the unpaid present entitlement. Print X in the CODE box at the right of Y if none of the above transactions took place.

Lodgment day

The lodgment day is the earlier of the due date for lodgment and date of lodgment of the trust’s tax return for the income year in which the payment, loan or debt forgiveness occurred.

48 Trading stock election

The trust may elect to value an item of trading stock below the lowest value of cost, market selling value, or replacement value, because of obsolescence or any other special circumstances. The value it elects must be reasonable. For more information on trading stock valuations where obsolescence or other special circumstances exist, see TR 93/23 Income tax: valuation of trading stock subject to obsolescence or other special circumstances.

If the trust makes an election, print X in the Yes box at this item. Otherwise, print X in the No box.

49 Aggregated turnover

Select your aggregated turnover range

You must complete item 49 if you are making a claim in your tax return for any of the following:

Select a category code from the table below based on your aggregated turnover range and show the category code you select at P on your tax return. You can use either your 2020–21 aggregated turnover or your 2019–20 aggregated turnover. For further information, see Aggregation

Category code

Aggregated annual turnover range

A

$0 to less than $7.5 million

B

$7.5 million to less than $10 million

C

$10 million to less than $20 million

D

$20 million to less than $40 million

E

$40 million to less than $50 million

F

$50 million to less than $100 million

G

$100 million to less than $200 million

H

$200 million to less than $300 million

I

$300 million to less than $400 million

J

$400 million to less than $500 million

K

$500 million to less than $600 million

L

$600 million to less than $700 million

M

$700 million to less than $800 million

N

$800 million to less than $900 million

O

$900 million to less than $1 billion

P

$1 billion or over

You will not be penalised for specifying an incorrect category where you make your best attempt to calculate your aggregated turnover.

For information about calculating your aggregated turnover, see Aggregation.

If you selected category code P, or are a significant global entity you must also complete on your tax return the next field Q Aggregated turnover.

Aggregated turnover

Did you select category P from the table above or are a significant global entity?

No

Go to 50 Capital allowances.

Yes

Show at Q your actual aggregated turnover rounded to the nearest $100 million. You can use either your 2020–21 aggregated turnover or your 2019–20 aggregated turnover. For further information, see Satisfying the aggregated turnover threshold.

You will not be penalised for specifying an incorrect amount where you make your best attempt to calculate your aggregated turnover.

50 Capital allowances

In this section:

Record keeping

For more information, see Record keeping for capital expenses

Small business entities

Are you a small business using the simplified depreciation rules?

Yes Read on

No Go to Depreciating assets first deducted in 2020–21

Show at S the total amount of any deduction under temporary full expensing you claimed at K Depreciation expenses item 5.

Show at T the total number of any assets you are claiming temporary full expensing for.

You will not be penalised for specifying an incorrect amount at S and T where you have made your best attempt to determine the amounts you are claiming for.

You have finished this question. Go to Small business entity simplified depreciation.

Depreciating assets first deducted in 2020–21

Intangible depreciating assets first deducted

The following intangible assets are regarded as depreciating assets (providing they are not trading stock):

  • certain items of intellectual property, such as patents, registered designs, copyrights and certain types of licences
  • computer software, or a right to use computer software, that the trust acquires, develops or has someone else develop for its own use (that is, in-house software)
  • mining, quarrying or prospecting rights and information
  • spectrum licences
  • datacasting transmitter licences
  • certain indefeasible rights to use telecommunications cable systems (IRUs)
  • some access rights to telecommunications sites.

A depreciating asset that the trust holds starts to decline in value from the time the trust uses it (or installs it ready for use) for any purpose, including a private purpose. However, the trust can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

Show at A the cost of all intangible depreciating assets for which the trust is claiming a deduction for decline in value for the first time. If the trust has allocated any intangible depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, include the cost of those assets at A. Do not reduce the cost for estimated non-taxable use.

Do not include expenditure on in-house software which has been allocated to a software development pool at A.

For more information on decline in value, cost, low-value pools, in-house software and software-development pools, see Guide to depreciating assets 2021.

Include here the cost of intangible assets for which you are claiming an immediate deduction under the instant asset write off rules and temporary full expensing rules.

Other depreciating assets first deducted

A depreciating asset the trust holds starts to decline in value from the time the trust uses it (or installs it ready for use) for any purpose. However, the trust can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

Show at B the cost of all depreciating assets (other than intangible depreciating assets) for which the trust is claiming a deduction for the decline in value for the first time. If any assets (other than intangible depreciating assets) costing less than $1,000 have been allocated to a low-value pool for the income year, also include the cost of those assets at B. Do not reduce the cost for any estimated non-taxable use.

Include here the cost of assets for which the trust is claiming an immediate deduction under the instant asset write off rules and temporary full expensing rules. For more information, see Guide to depreciating assets 2021.

Temporary full expensing of depreciating assets

In this section:

P – Are you making a choice to opt out of temporary full expensing for some or all of your eligible assets?

You can choose to opt out of temporary full expensing on an asset–by-asset basis in an income year and apply the other depreciation rules to that asset. You make this choice for a particular depreciating asset for each applicable income year. Once a choice is made it cannot be revoked.

Show at P:

  • A if you are opting out for some of your assets
  • B if you are opting out for all of your assets.

For more information, see Temporary full expensing.

Q – Number of assets you are opting out for

Show at Q the number of assets for which you made the choice to opt out of temporary full expensing.

R – Value of assets you are opting out for

Show at R the value of the assets for which you made the choice to opt out of temporary full expensing. The value is the amount you would have otherwise claimed for these assets under temporary full expensing if you had not made the choice to opt out. You will not be penalised for specifying an incorrect amount at Q and R where you have made your best attempt to determine the amounts you are opting out for.

S – Temporary full expensing deductions

Show at S the total amount of the deductions that you are claiming under temporary full expensing.

T – Number of assets you are claiming for

Show at T the number of assets for which you are claiming temporary full expensing. You will not be penalised for specifying an incorrect amount at S and T where you have made your best attempt to determine the amounts you are claiming for.

Backing business investment – accelerated depreciation

V – Are you making a choice to opt out of Backing business investment for some or all of your eligible assets?

If you are a trust with aggregated turnover less than $500 million in 2020–21 you may be eligible to deduct an amount under Backing business investment – accelerated depreciation if:

  • the asset is an eligible asset, and
  • temporary full expensing and instant asset write off do not apply.

You then choose whether or not to use the Backing business investment – accelerated depreciation.

Show at V either:

  • the letter A if you are opting out for some of your eligible assets
  • the letter B if you are opting out for all of your eligible assets.

You may choose to opt out of the backing business investment incentive on an asset–by-asset basis. You then apply the general capital allowance rules for that asset. Once a choice is made it cannot be revoked.

For more information see Backing business investment – accelerated depreciation

W – Number of assets you are opting out for

Show at W the number of assets for which you are opting out of Backing business investment – accelerated depreciation.

X – Value of assets you are opting out for

Show at X the total cost of the assets for which you are opting out of Backing business investment – accelerated depreciation. You will not be penalised for specifying an incorrect amount at W and X where you have made your best attempt to determine the amounts you are opting out for.

M – First year accelerated depreciation deductions for assets using Backing business investment

Show at M the total amount you claimed using Backing business investment for assets first used or installed ready for use in 2020–21. The amounts claimed are:

  • 50% of the cost (or adjustable value where applicable) of the depreciating asset in the income year the asset is first used or installed ready for use, and
  • the amount of the usual depreciation deduction that would otherwise apply but calculated as if the cost or adjustable value of the asset were reduced by 50%.

Use M only for assets for which you claim a deduction for the decline in value assets subject to Backing business investment – accelerated depreciation for the first time.

For more information, see Backing business investment – accelerated depreciation.

Instant asset write-off deductions for non-small business entities

Show at O the total amount you claim for assets costing less than the relevant instant asset write-off threshold for which an immediate deduction is available.

Eligibility to use instant asset write-off depends on:

  • your aggregated turnover (see: Aggregated turnover)
  • the date you purchased the asset
  • the date the asset was first used or installed ready for use
  • the cost of the asset being less than the threshold.

If your aggregated turnover is $500 million or more, you are not eligible to use instant asset write-off on an asset.

If your aggregated turnover is over $10 million and less than $500 million you can claim an immediate deduction for the business portion of the cost of an asset costing less than $150,000 purchased from 7:30pm (AEDT) on 2 April 2019 to 31 December 2020 and first used, or installed ready for use, before 30 June 2021.

If temporary full expensing applies to the asset, do not use this label. Use label S Temporary full expensing.

For more information about instant asset write off, see Guide to depreciating assets 2021.

See also:

Self-assessment of effective life

For most depreciating assets, you can choose to:

  • work out the effective life yourself (self-assess), or
  • use an effective life determined by the Commissioner.

If you have adopted the Commissioner’s effective life determination for all your depreciating assets print X in the No box at C.

If you have self-assessed the effective life of any of your depreciating assets, print X in the Yes box at C.

For all depreciating assets

Recalculation of effective life

You may recalculate the effective life of assets in certain circumstances if the effective life you have been using is no longer accurate. There are also circumstances where you must recalculate the effective life of a depreciating asset.

If you have not recalculated the effective life of any of your depreciating assets in this income year, print X in the No box at D.

If you have recalculated the effective life of any of your depreciating assets in this income year, print X in the Yes box at D.

Total adjustable values at end of income year

At E, write the total of the adjustable values of your depreciating assets as at the end of the income year. This is the value of all assets costs (first and second elements) less any decline in value up to that time, or the closing value of all assets.

If the trust has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the adjustable values of those assets at E Total adjustable values at end of income year.

Assessable balancing adjustments on the disposal of intangible depreciating assets

At F, write the total assessable income you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred this income year (this type of assessable income may arise if, for example, you disposed of an intangible depreciating asset for more than its adjustable value). If you do not have any assessable balancing adjustment amounts for intangible assets this year, leave this label blank.

If the trust has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the assessable balancing adjustments for these assets at F Assessable balancing adjustments on the disposal of intangible depreciating assets.

Deductible balancing adjustments on the disposal of intangible depreciating assets

At G, write the total deductible amount you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred this income year (this type of deduction may arise if, for example, you disposed of an intangible depreciating asset for less than its adjustable value). If you do not have any deductible balancing adjustment amounts for intangible assets this year, leave this label blank.

If the trust has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the assessable balancing adjustments for these assets at G Deductible balancing adjustments on the disposal of intangible depreciating assets.

Termination value of intangible depreciating assets

Show at H the termination value of each balancing adjustment event occurring for intangible depreciating assets to which the uniform capital allowances rules applied, including assets allocated to a low-value pool.

Do not show at H any consideration received during the income year for in-house software for which the trust has allocated expenditure to a software development pool.

A balancing adjustment event occurs if:

  • you stop holding the asset; or
  • you stop using it and expect never to use it again; or
  • you have not used it and you decide never to use it.

Generally, the termination value is the amount the trust receives or is deemed to receive for the balancing adjustment event. It includes the market value of any non-cash benefits, such as goods and services the trust receives for the asset.

For more information, see Guide to depreciating assets 2021.

Termination value of other depreciating assets

Show at I the termination value of each balancing adjustment event occurring for depreciating assets, including assets allocated to a low-value pool.

Do not show at I any consideration received during the income year for:

  • depreciating assets allocated in a prior year to the general small business pool
  • intangible depreciating assets
  • buildings or structures for which a deduction is available under the capital works provisions
  • assets used in research and development (R&D) activities, or
  • assets falling within the provisions relating to investments in Australian films.

A balancing adjustment event occurs if the trust stops holding or using a depreciating asset and expects never to use it again, or decides not to use it in the future, for destroyed. Generally, the termination value is the amount the trust receives or is deemed to receive for the balancing adjustment event. It includes the market value of any non-cash benefits, such as goods and services the trust receives for the asset.

For more information on balancing adjustment events and termination value, see Guide to depreciating assets 2021.

Subsequent year accelerated depreciation deductions for assets using Backing business investment

If you are a trust that used the Backing business investment – accelerated depreciation in 2019–20, show at N the amount of depreciation you claim in 2020–21.

This is the second year depreciation amount claimed for all assets for which you used Backing business investment – accelerated depreciation in 2019–20.

Instant asset write off deductions for non-small business entities

Show at O the total amount you claim for assets costing less than the relevant instant asset write-off threshold for which an immediate deduction is available.

Eligibility to use instant asset write-off depends on:

If your aggregated turnover is $500 million or more, you are not eligible to use instant asset write-off on an asset.

If your aggregated turnover is over $10 million and less than $500 million you can claim an immediate deduction for the business portion of the cost of an asset costing less than $150,000 purchased from 7:30pm (AEDT) on 2 April 2019 to 31 December 2020 and first used, or installed ready for use, before 30 June 2021.

If temporary full expensing applies to the asset, do not use this label. Use label S Temporary full expensing.

For more information about instant asset write off, see Guide to depreciating assets 2021.

See also:

Deduction for project pools

Show at J the trust's deductions for project pools. For more information, see Appendix 6.

For more information on project pools, see Guide to depreciating assets 2021.

Section 40-880 deduction

Show at K the total of the trust’s deductions allowable under section 40-880 of the ITAA 1997. For more information, see Appendix 6.

For more information on business related costs – section 40-880 deductions, see Guide to depreciating assets 2021.

Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset

Show at L the deduction available to the trust for landcare operations and for the decline in value of water facilities, fencing assets and fodder storage assets. For more information see Appendix 6.

51 Small business entity simplified depreciation

Is the trust:

  • a small business entity, and
  • using the simplified depreciation rules?

No – Go to 52 National rental affordability scheme (NRAS) tax offset.

Yes – Read on.

The instant asset write-off thresholds for small business entities have recently changed.

Small business entities can claim an immediate deduction for most depreciating assets purchased from 7:30pm AEST on 12 May 2015 and on or before 31 December 2020 and first used, or installed ready for use, for a business purpose from 12 March 2020 to 30 June 2021, if they cost less than $150,000 each (the instant asset write-off threshold).

For assets you start to hold, and first use, or have installed ready for use, for a taxable purpose from 7:30pm (AEDT) on 6 October 2020 to 30 June 2022, the instant asset write-off threshold does not apply to businesses using the simplified depreciation rules. You must immediately deduct the business portion of the asset's cost under temporary full expensing.

To complete this item, use the amounts calculated for small business entity depreciation deductions at K item 5.

Show at A the total amount you claimed at K Depreciation expenses item 5 relating to assets costing less than $150,000 and purchased before 7:30pm (AEDT) 6 October 2020, and first used or installed ready for use for a taxable purpose in the current year. This is one of the components from row (a) in Table 4. but does not include any amounts relating to temporary full expensing.

Show at B the total amount you claim at K Depreciation expenses item 5 relating to the general small business pool. This is the total amounts from rows (b) and (c) in Table 4.

52 National rental affordability scheme (NRAS) tax offset

Refundable NRAS tax offsets may flow indirectly to certain beneficiaries of a trust or to the trustee of the trust provided the Secretary of the Department of Social Services has issued the trust (or a trust through which their interest is ultimately obtained) a certificate under NRAS and the income year of that trust begins in the NRAS year to which the certificate relates.

The amount of the tax offset is the amount stated on the certificate shared between the beneficiaries of the trust (or the trustee) according to their share of the NRAS rent of the trust for the NRAS year and the total NRAS rent derived by rental dwellings covered by the certificate for the relevant income year.

If a trustee is assessed under section 98 of the ITAA 1936 on behalf of a beneficiary who is entitled to a share of the NRAS rent, then the trustee is entitled to that percentage share of the NRAS tax offset.

If the trustee is assessed under section 99 or 99A of the ITAA 1936, the trustee may also be entitled to a share of the NRAS tax offset.

In circumstances where the trust has no net income for the year, for the purposes of the NRAS provisions, no beneficiary can receive a share of NRAS rent indirectly and, as a result, no NRAS tax offset can flow indirectly to the beneficiaries. In these circumstances, the trustee may be able to claim the refundable tax offset.

Show at F the total NRAS tax offset available to the beneficiaries or trustee (including any NRAS tax offset received indirectly through a partnership or other trust) for the income year.

The beneficiaries and trustee's share of the NRAS tax offset must be shown at this item and at item 57 Statement of distribution.

The amount of the trust’s tax offset is the amount stated on the certificate issued by the Secretary of the Department of Social Services. However, if the Secretary issues the entity with an amended certificate under the National Rental Affordability Scheme Act 2008External Link, the amount of the trust’s tax offset is the amount stated in the amended certificate.

Note the NRAS is no longer taking new investments.

For more information, see National rental affordability scheme – taxation issues.

53 Other refundable tax offsets

Exploration credit tax offset

Show at G the total exploration credits received by the trust during the income year (including any exploration credits received indirectly through a partnership or other trust) and print E in the CODE box.

Show the beneficiaries and trustee's share of the exploration credit tax offset at this item and at item 57 Statement of distribution.

For more information, see What to do if you receive exploration credits

54 Non-refundable carry forward tax offsets

Show the following amounts that the trust has available to allocate to the beneficiaries and the trustee for 2020–21 at:

If the trustee has a carried forward amount of either of these tax offsets from the previous year, show them at K or M item 57 Statement of distribution – Income to which no beneficiary is presently entitled, as applicable.

Early stage venture capital limited partnership tax offset for the current year

An entitlement to the early stage venture capital limited partnership (ESVCLP) tax offset may be available for eligible contributions made to an ESVCLP during the current year.

The ESVCLP must have become unconditionally registered on or after 7 December 2015.

If the trust is a limited partner of an ESVCLP, the amount of the tax offset that the trust would be entitled to is 10% of the lesser of the following:

  • the trust's total contribution to the ESVCLP during 2020–21 (certain exclusions apply), and
  • the trust's share (based on the trust's interest in the entire capital of the ESVCLP at the end of the current income year) of the sum of eligible venture capital investments made by the ESVCLP during the period starting at the start of the current income year and ending two months after the end of the current income year.

If the trust is a partner in a partnership or a beneficiary of another trust which has contributed to an ESVCLP, the trust may be entitled to an amount of ESVCLP tax offset. A written notification will be provided by the partnership or trustee of the other trust setting out the trust's entitlement to this tax offset. If a written notification has not been provided, contact the partnership or the trustee of that other trust.

Write at H item 54 the sum of the ESVCLP tax offset amounts:

  • to which the trust would have been entitled for 2020–21, and
  • that have been allocated to the trust as a member of another trust or a partnership.

The amount at H item 54 is the amount of the ESVCLP tax offset that is available for allocation to the beneficiaries and trustee for 2020–21.

This tax offset is non-refundable. If the trustee is entitled to an amount of tax offset and is unable to utilise it in the current year, the trustee may be able to carry forward the tax offset.

The amount of unused ESVCLP tax offset from the current year will be shown on the trustee’s notice of assessment for 2020–21.

For more information on working out the amount of the ESVCLP tax offset available to the trust for allocation in 2020–21, see ESVCLP tax incentives and concessions.

Early stage investor tax offset for the current year

An entitlement to the early stage investor tax offset may be available for investments made in an eligible early stage innovation company during the current year. To qualify for this tax offset there are requirements that need to be satisfied by the investor (i.e. trust) and by the early stage innovation company. If the investor is entitled to an early stage investor tax offset for the current year, this amount is worked out as set out below.

Calculating the 2020–21 early stage investor tax offset available to the trust

  • Step 1: Work out the total amount the trust paid for newly issued shares in all early stage innovation companies in 2020–21.

    If the trust does not meet the requirements of the 'sophisticated investor' test for at least one of the investments in an early stage innovation company in 2020–21, the step 1 amount must not exceed $50,000. If the step 1 amount exceeds $50,000 the trust cannot claim this offset.
  • Step 2: Multiply the step 1 amount by 20%.
  • Step 3: Identify the amount of any early stage investor tax offsets that have been allocated to the trust as a beneficiary of another trust, or a partner in a partnership, that has invested in an early stage innovation company during 2020–21.
  • Step 4: Add together the amounts at step 2 and step 3. This is the step 4 amount.
  • Step 5: Subtract from $200,000 the amount (if any) reported at M item 57 Statement of distribution – Income to which no beneficiary is presently entitled. This result is the step 5 amount.
  • Step 6: If the step 4 amount is equal to or less than the step 5 amount, write the step 4 amount at I item 54.

If the step 4 amount is greater than the step 5 amount, write the step 5 amount at I item 54.

The amount reported at I item 54 may need to be further reduced if any of the trust's affiliates are entitled to the early stage investor tax offset (whether for investments they made in 2020–21 or carried forward from 2019–20). The maximum offset (including current year and carried forward from prior year amounts) that you and your affiliates combined, are entitled in 2020–21 is $200,000.

The amount at I item 54 is the amount of the early stage investor tax offset that is available for allocation to the beneficiaries and trustee for 2020–21.

This tax offset is non-refundable. If the trustee is entitled to an amount of tax offset and is unable to utilise it in the current year, the trustee may be able to carry forward the tax offset.

The amount of unused early stage investor tax offset from the current year will be shown on the trustee’s notice of assessment for 2020–21.

For more information, see Tax incentives for early stage investors.

55 Medicare levy reduction or exemption

A trustee needs to complete this item only if all of the following conditions apply:

  • The trustee is liable to be assessed on a share of the net income of the trust because a beneficiary is presently entitled to a share of the income of the trust (or specifically entitled to an amount of capital gains or franked distributions) but under a legal disability.
  • The amount of the net income of the trust upon which the trustee is liable to be assessed in respect of a particular beneficiary is more than the relevant threshold amount for the Medicare levy as set out in part A of Question M1 in the Individual tax return instructions 2021.
  • The beneficiary qualifies for an exemption or reduction in the Medicare levy under one of the categories set out in Question M1 in Individual tax return instructions 2021.

If there is more than one such beneficiary, provide a statement on a separate sheet of paper setting out the information required at this item for each additional beneficiary. 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.

Spouse’s 2020–21 taxable income

Show at A the taxable income of the beneficiary’s spouse for 2020–21. If the beneficiary had no spouse or had a spouse who had no taxable income, write zero (0) at A.

Number of dependent children and students

Show at B the number of the beneficiary’s dependent children and students, if any.

C and D

For details of the various Medicare levy exemption categories, see Question M1 in the Individual tax return instructions 2021.

Full Medicare levy exemption – number of days

Show at C the number of days in 2020–21 for which the beneficiary was entitled to the full Medicare levy exemption. If you have completed C and the beneficiary has been issued with a statement from the Medicare Entitlement Statement Unit of Services Australia showing that the beneficiary is not entitled to any Medicare benefits, print C in the CODE box.

Half Medicare levy exemption – number of days

Show at D the number of days during 2020–21 for which the beneficiary was entitled to a half Medicare levy exemption.

Medicare levy on net income assessed to the trustee under sections 99 or 99A of the ITAA 1936

If a trustee is liable to be assessed on that part of the net income of a trust (other than a trust of a deceased person) under either sections 99 or 99A of the ITAA 1936 the trustee may need to pay the Medicare levy.

If a trustee is assessed on part or all of the net income of a trust under either sections 99 or 99A of the ITAA 1936 and is liable to pay tax on all of the income so assessed at the top marginal tax rate, the trustee must pay the Medicare levy at 2% of net income.

In other situations, if the net income assessed to the trustee is:

  • $416 or less, no Medicare levy is payable
  • $417 to $520, the Medicare levy is 10% of the excess over $416
  • more than $520, the Medicare levy is 2% of the net income assessed to the trustee.

For a trust of a deceased person, no Medicare levy is payable on that part of the net income of the trust that is assessed under either sections 99 or 99A of the ITAA 1936.

Medicare levy surcharge

If the beneficiary’s share of the trust net income to which a trustee is assessed under section 98 exceeds either $90,000 (if single) or $180,000 for the family surcharge threshold (plus $1,500 for each dependent child after the first) the trustee may be liable for the Medicare levy surcharge (MLS). See Question M2 in the Individual tax return instructions 2021.

Provide a statement on a separate sheet of paper showing:

  • the trust's name
  • the trust's TFN
  • the beneficiary’s name
  • the beneficiary’s TFN
  • the beneficiary’s share of the net income of the trust estate
  • the number of days not liable for MLS
  • the full name of the beneficiary’s spouse, if applicable
  • if the beneficiary did not have a spouse for the full year (the period they had the spouse)          
    • the date from which the beneficiary had a spouse
    • the date to which the beneficiary had a spouse
     
  • if the beneficiary's spouse died during the year
  • the spouse’s income for (Medicare levy) surcharge purposes, if applicable
  • the number of dependent children, if applicable
  • the health insurer identification (ID) code, if applicable
  • the membership number, if applicable.

Sign the statement, attach it 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.

The definition of dependant for the purposes of MLS differs from the definition of dependant for other tax purposes.

The beneficiary’s and their spouse’s income for MLS purposes must be calculated:

  • ignoring the exemption under section 271-105 of Schedule 2F to the ITAA 1936 for distributions on which family trust distribution tax (FTDT) has been paid; for more information about the circumstances in which FTDT is payable, see Family trust distribution tax
  • excluding the taxed element of a superannuation lump sum, other than a death benefit, that they received when they were over their preservation age and under 60 years old that does not exceed their low-rate cap amount.

Medicare levy surcharge rate

The amount of Medicare levy surcharge (MLS) payable may increase depending on the beneficiary’s income for (Medicare levy) surcharge purposes.

The rates are detailed in Question M2 in the Individual tax return instructions 2021.

The MLS is income tested against the following income tier thresholds:

Income thresholds

Category

Threshold

Tier 1

Tier 2

Tier 3

Singles

$0 – $90,000

$90,001 – $105,000

$105,001 – $140,000

$140,001 and above

Families (see note)

$0 – $180,000

$180,001 – $210,000

$210,001 – $280,000

$280,001 and above

Rates

0%

1%

1.25%

1.5%

The families’ threshold is increased by $1,500 for each dependent child after the first. Families include couples and single parent families.

Income for (Medicare levy) surcharge purposes is only used to determine whether the beneficiary is liable to pay the MLS. It is not used to calculate the surcharge amount.

The MLS is only levied on the total of the beneficiary’s:

  • taxable income
  • reportable fringe benefits amount, and
  • any amount on which family trust distribution tax has been paid.

If the beneficiary is over their preservation age and under 60 years old, MLS is not levied on any taxed element of a super lump sum they received (other than a death benefit) that does not exceed the low rate cap.

For more information, see Income for Medicare levy surcharge purposes.

56 Income of the trust estate

Show at A the income of the trust estate for trust law purposes. This is the income of the trust estate as that expression is found in Division 6 of the ITAA 1936 and related provisions. This is the total distributable income of the trust that the trustee determine is legally available for distribution to trust beneficiaries in the income year.

This calculation may depend on the terms of the trust and general trust law principles: you may need to carefully consider the trust deed, the trust accounts and relevant resolutions to determine what the trust's distributable income is. Because this amount is determined in accordance with trust law principles and where applicable, the terms of the particular trust, it may be different to the accounting income of the trust or the net (taxable) income of the trust for tax purposes.

If the income of the trust estate is a loss amount, then enter '0' at A.

Subject to the application of Division 6E of the ITAA 1936 and the provisions relating to the streaming of capital gains and franked distributions, Division 6 of the ITAA 1936 broadly operates to assess beneficiaries who are presently entitled to a share of the income of the trust estate and not under a legal disability on the same share of the net (taxable) income of the trust. This is commonly referred to as the proportionate approach to trust taxation. Division 6 broadly operates in a similar manner to assess a trustee in respect of certain presently entitled beneficiaries who are under a legal disability or who were non-resident at year end. The balance of net (taxable) income not assessed to any beneficiary is generally assessed to the trustee.

For more information about present entitlement, the application of Division 6E and the provisions relating to streaming of franked distributions, see Is a beneficiary presently entitled to a share of the income of the trust estate?

A beneficiary who is presently entitled to a share of the income of the trust estate shown here at A item 56 will have an amount recorded at W item 57 Statement of distribution.

More on the meaning of ‘income of the trust estate’ and the ‘proportionate approach’ to trust taxation

Bamford decision impact statement

The 2010 High Court of Australia case of Commissioner of Taxation v. Bamford clarified the meaning of income of the trust estate and share of income. In response to the judgment we released a decision impact statement (DIS). The DIS includes the following key propositions:

  • The income of a trust estate for trust law purposes and its income for tax purposes are two different subject matters which do not necessarily correspond.
  • In subsection 97(1) of the ITAA 1936 income of the trust estate takes its meaning from the general law of trusts and not from taxation law.
  • Under the general law of trusts the concept of income is governed by a set of rules designed to ensure that trustees fairly apportion the receipts and outgoings of a period between those entitled to income and those with an interest in capital.
  • The rules of apportionment adopted by the general law of trusts take the form of presumptions about whether particular receipts or outgoings constitute income or capital. The trust law presumptions can be displaced by express provision in the trust deed.
  • The apportionment of receipts and outgoings forms part of the processes in trust administration, whereby the surplus or distributable income to which income beneficiaries may become presently entitled in respect of distinct year(s) of income is ascertained (the distributable income).

TR 2012/D1

Draft Taxation Ruling 2012/D1 Income tax: meaning of 'income of the trust estate' in Division 6 of Part III of the Income Tax Assessment Act 1936 and related provisions was released on 28 March 2012. The draft ruling explains that the income of the trust estate is a reference to the income for trust purposes that a beneficiary could be made presently entitled to or a trustee could accumulate. This ruling may assist you in completing A at item 56 and W at item 57.

The ruling is in draft form and while it sets out the Commissioner’s preferred view, it also contains alternative views which could, in appropriate circumstances, support a reasonably arguable position in the context of penalties. Under self-assessment, you can follow the meaning as set out in the ruling or, if you disagree with aspects of that ruling, you can apply what you understand the term to mean for the purpose of present entitlement and completing the items. What you show at A at item 56 and W at item 57 should be your honest determination of what the trust’s distributable income is, and each relevant beneficiary’s entitlement to that income by year end.

If you choose to calculate the trust’s distributable income based on one of the alternative views in TR 2012/D1, for example, according to a so-called ‘income equalisation clause’, this income is the amount you include at A item 56. Even if the Commissioner later takes the view that the trust’s distributable income is a different amount, you will not have made an error in your completion of this label.

TD 2012/22

There is more explanation of the proportionate approach to trust taxation in Division 6 of the ITAA 1936 in Taxation Determination TD 2012/22 Income tax: for the purposes of paragraph 97(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) is a beneficiary's share of the net income of a trust estate worked out by reference to the proportion of the income of the trust estate to which the beneficiary is presently entitled?

The TD contains practical examples which explain the relevance of the trust deed and the wording of the trustee resolution to the outcome which will arise under the proportionate approach.

For more information, see:

  • Bamford Decision Impact Statement
  • Draft Taxation Ruling TR 2012/D1 Income tax: meaning of 'income of the trust estate' in Division 6 of Part III of the Income Tax Assessment Act 1936 and related provisions
  • Taxation Determination TD 2012/22 Income tax: for the purposes of paragraph 97(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) is a beneficiary's share of the net income of a trust estate worked out by reference to the proportion of the income of the trust estate to which the beneficiary is presently entitled?

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