Trustee beneficiary reporting rules

Excluded trusts

Broadly, the test 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, and exempt entities have fixed entitlements, directly or indirectly, and for their own benefit, to all of the income and capital of the trust
unit trust whose units are listed on the stock market operated by ASX Limited
trust that has a valid family trust election in force
trust that has a valid interposed entity election in force
trust that forms part of a 'family group'.

For more on family trust election, interposed entity election and family group, refer to Family trust elections (FTEs) and Interposed entity elections (IEEs) - Questions and answers.

Whether or not a trust is an excluded trust is considered in terms of the test trust and not its beneficiaries. That is, the test is not whether one or more of the beneficiaries would themselves be an excluded trust for these rules, but rather, whether the test trust is an excluded trust.

The test trust is not an excluded trust merely by reason of being a fixed trust. A fixed trust may only be an excluded trust where all of its beneficiaries are exempt from income tax.

Example: Excluded trusts

'Trust A' is a unit trust. The three beneficiaries of Trust A are the trustee of a complying super fund and the trustees of two discretionary trusts. Each of the discretionary trusts has made a family trust election.

Excluded trusts example

Trust A is not an excluded trust just because its beneficiaries are excluded trusts. It does not matter whether the family trust elections have the same or different 'test individuals'. Trust A would only be an excluded trust if it were itself the subject of a valid family trust election or an interposed entity election.

Trust A will therefore be a closely held trust for the purposes of the trustee beneficiary rules if it satisfies 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 may be taken to be an individual 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 the beneficiaries of Trust A are trustees of discretionary trusts. Two of the discretionary trusts each hold a fixed entitlement to a 50% share of the income of Trust A. The third trustee 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.

Example of beneficiaries that are trustees of discretionary trusts

Because fewer than 20 individuals have between them fixed entitlements to a 75% or more share of the income - and a 75% or more share of the capital of the trust - Trust A satisfies the 20/75 test and is a closely held trust for the purposes of the trustee beneficiary rules.

For a comparison of where the trustee beneficiary reporting rules (and the tax file number (TFN) withholding rules) apply, refer to How the rules for closely held trusts apply.

Sections within Trustee beneficiary reporting rules

Last Modified: Tuesday, 9 August 2011