Trust tax return instructions 2011

16 Deductions relating to Australian investment income

Show at P the expenses incurred in earning interest and dividends.

If the trust was paid a dividend by a LIC and the dividend included a LIC capital gain amount, the trust can claim a deduction of 50% of the LIC capital gain amount. The listed investment company's dividend advice statement shows the LIC capital gain amount.

Expenses listed here that are costs associated with borrowing and servicing debt may not be allowable deductions under the thin capitalisation rules. For more information, see appendix 3. The disallowed amount reduces the amount that would otherwise go at P.

Deductions for the decline in value of depreciating assets used to earn interest and dividends are generally shown at P. However, if the trust has allocated some of these assets to a low-value pool, you may need to show deductions at Q. For more information, see appendix 6.

Even if the TOFA rules apply to the trust, show at P all deductions relating to Australian investment income. This includes amounts from financial arrangements subject to the TOFA rules.

If what you show at P includes an amount which is brought to account under the TOFA rules, also complete item 31 Taxation of financial arrangements (TOFA).

For more information, see Guide to the taxation of financial arrangements (TOFA) rules at www.ato.gov.au/tofa

Former STS taxpayers still using the STS accounting method

If the trust is eligible and has chosen to continue using the STS accounting method, it can claim general deductions (for example, interest expense) only when they are paid. For more information on the STS accounting method see appendix 14.

Sections within Deductions

• 16 Deductions relating to Australian investment income
• 17 Forestry managed investment scheme deduction
• 18 Other deductions
• 19 Total of items 16 to 18
• 20 Net Australian income or loss
• 21 Capital gains