TFN withholding for closely held trusts

Excluded payments

The following payments are excluded from the TFN withholding rules:

• Payments that are less than the thresholds set by the regulations - withholding is not required if the payment is below $120 for the whole income year (or if the payment is for part of the income year - 120 multiplied by the number of days to which the payment applies, divided by 365).
• Payments in respect of income of the trust that were subject to the TFN withholding rules in an earlier year - that is, amounts that a beneficiary was presently entitled to but which the trustee did not distribute.
• Payments in respect of income of the trust that the beneficiary was presently entitled to and related to an income year before the TFN withholding rules applied.
• Payments to beneficiaries that are outside the family group if the trust is a family trust, as the trust is subject to family trust distributions tax.
• Payments to trustee beneficiaries, if the trustee is required to make a TB statement under the trustee beneficiary reporting rules.

For more information, see Interaction with other trust rules.

Example 7: No withholding for earlier income year

'Faith Holdings Pty Ltd' is a beneficiary of the 'Hope Trust', which is a closely held trust. In the 2009 income year, Faith Holdings was presently entitled to $1,000 of trust income from the Hope Trust - however, at 30 September 2010, Faith Holding's share of the trust income remained unpaid.

On 1 October 2010, the trustee of the Hope Trust paid $900 to Faith Holdings which represented their share of the 2009 trust net income. The directors of Faith Holdings had not provided the trustee of the Hope Trust with the company's TFN so normally the trustee would be required to withhold from that payment.

However, because the payment was related to the trust net income of the 2009 income year, which is an income year before the TFN withholding rules applied, the trustee of the Hope Trust is not required to withhold from that payment.

Sections within Withholding by trustees

• TFN withholding flowchart
• What is a payment?
• When you need to withhold
• Temporary administrative concession - trustee in process of obtaining a TFN
• Excluded payments
• Withholding rate
• Registering for PAYG withholding for closely held trusts
• Annual TFN withholding report
• Paying withheld amounts to us
• Cancelling PAYG withholding for closely held trusts registration
• Payment summaries
• Penalties