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  • Overseas transactions – items 29 to 30

    In this section:

    29 Overseas transactions

    In this section:

    Was the aggregate amount of your transactions or dealings with international related parties (including the value of any property/service transferred or the balance of any loans) greater than $2 million?

    No – Print X in the No box at W.

    Yes – Print X in the Yes box at W.

    Did the thin capitalisation provisions affect you?

    Print X in the appropriate box at O. For more information, see Appendix 3.

    If the answer is yes for either W or O, complete and attach an International dealings schedule 2021 to the tax return. Print X in the Yes box at Have you attached any 'other attachments'? at the top of page 1 of the tax return.

    Where the trust is a member of a consolidated group or MEC group for the whole income year and derived foreign income, the responsibility for preparing the schedule will rest on the head company of the group. Where a return is required because the trust had a period in the income year when it was not a member of a consolidated group or MEC group (a non-membership period) the trust should complete an International dealings schedule 2021 where it has derived foreign income attributable to non-membership period. For information about reporting multiple non-membership periods during the year, see Consolidation reference manual sheet C9-5-110.

    The aggregate amount of the trust’s transactions or dealings is the total amount of all dealings, whether on revenue or capital account (including property transfers or service provision), and includes the balance of any loans or borrowings outstanding with international related parties. Transactions must not be netted off against each other. For example a $600,000 purchase from, and a $700,000 sale to, a related party should be treated as totalling $1,300,000, not $100,000.

    International related parties may be persons who are not dealing wholly independently with one another in their cross-border commercial or financial relations, and whose dealings or relations can be subject to Subdivision 815-B of the ITAA 1997 or the associated enterprises article of a relevant double tax agreement (DTA).

    The term includes the following:

    • any overseas entity or person who participates directly or indirectly in the management, control or capital of the trust
    • any overseas entity or person in respect of which the trust participated directly or indirectly in the management, control or capital
    • any overseas entity or person in respect of which persons who participate directly or indirectly in its management, control or capital are the same persons who participate directly or indirectly in the management, control or capital of the trust.

    Participates includes a right of participation, the exercise of which is contingent on an agreed event occurring. Person has the same meaning as in subsection 6(1) of the ITAA 1936 and section 995-1 of the ITAA 1997.

    For more information as to the relevant degree of participation, see Taxation Ruling IT 2514 Income tax: Company Schedule 25A: Information return for companies that transact business with related overseas entities.

    The type of dealings or transactions which will require the trust to complete an International dealings schedule 2021 are its dealings with:

    • related parties as above, such as an overseas holding company, overseas subsidiary, or non-resident trust in which the entity has an interest
    • unrelated parties where the conditions that operate between you and the unrelated party are different to the conditions that might be expected to operate between independent parties dealing wholly independently with one another in comparable circumstances.

    These dealings or transactions may be the provision or receipt of goods or services, or transactions in which money or property has been sent out of Australia, or received in Australia from an overseas source during the income year. They may include the transfer of tangible or intangible property, provision or receipt of services, or the provision or receipt of loans or financial services.

    If money or property is not actually sent out of Australia or received in Australia, but accounting entries are made that have the effect of money or property being transferred, this is also to be taken as an international transaction.

    Interest expenses overseas

    Show at D the amount of interest paid to non-residents.

    This amount should have been included at I item 5, plus or minus any reconciliation adjustment for interest expense that you include at B Expense reconciliation adjustments item 5.

    If you include an amount at D, complete an International dealings schedule 2021.

    An amount of tax (withholding tax) is generally withheld from interest paid or payable to non-residents, and from interest derived by a resident through an overseas branch. You must remit these amounts to us. You cannot claim a deduction unless you have remitted any withholding tax to the Commissioner of Taxation. If you have withheld amounts from payments to non-residents, you may need to lodge a PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report by 31 October 2021. For more information, phone 13 28 66.

    Do not use the trust tax return as a substitute for the PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report.

    Royalty expenses overseas

    Show at E the royalty expenses paid to non-residents during 2020–21.

    If you include an amount at E, complete an International dealings schedule 2021.

    This amount should have been included at J item 5, plus or minus any reconciliation adjustment for royalty expenses that you included at B Expense reconciliation adjustments item 5.

    An amount of tax (withholding tax) is generally withheld from royalties paid or payable to non-residents and from royalties derived by a resident through an overseas branch. You must remit this amount to us. You cannot claim a deduction unless you have remitted any withholding tax to the Commissioner. If you have withheld amounts from payments to non-residents, you may need to lodge a PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report by 31 October 2021. For more information, phone 13 28 66.

    Do not use the trust return as a substitute for the PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report.

    Record keeping

    Keep a record of the following:

    • names and addresses of recipients
    • amounts paid
    • nature of the benefit derived, for example, a copy of the royalty agreement
    • details of tax withheld where applicable and the date on which it was remitted to us.

    Non-resident beneficiaries

    Was any beneficiary who was not a resident of Australia at any time during the income year ‘presently entitled’ to a share of the income of the trust?

    If the answer to this question is no, print X in the No box at A. If the answer is yes, print X in the Yes box at A.

    Ensure that the details of the beneficiaries and the assessable amounts of net income referable to the income of the trust estate to which each beneficiary, who is a non-resident at the end of the income year, is presently entitled are entered under Non-resident beneficiary additional information in J and K at the bottom of item 57 Statement of distribution. Do not include here the non-resident beneficiary's share of the trust income which is subject to non-resident withholding tax, such as withholding tax on interest, dividend and royalties. Instead, these amounts should be detailed in the additional information statement for the beneficiary and attached to the return.

    If a beneficiary is a non-resident at the end of the income year and is presently entitled to a share of the income of the trust, the trustee is liable to tax on that share of the net income of the trust that is attributable to a period when the beneficiary was a resident, regardless of its source, and so much of the share of the net income that is attributable to a period where the beneficiary was a non-resident and is also attributable to Australian sources.

    In the case of amounts covered by a withholding requirement, the trustee, at the time of distribution, deducts the tax payable and remits it to us. If you have withheld amounts from payments to non-residents, you may need to lodge a PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report by 31 October 2021. For more information, phone 13 28 66.

    Attach a statement for each beneficiary who was a non-resident of Australia at any time during the income year, and who was presently entitled to income of the trust, showing:

    • full details of any distribution to the beneficiary, including amounts of interest, royalties, franked dividends and unfranked dividends
    • if a withholding amount has been paid and remitted to us from the distribution, the amount of such distribution and the withholding amount paid
    • name and residential address
    • if any change occurred in the residency status of the beneficiary during the income year, details of when the beneficiary became or ceased to be a resident
    • if from any distribution (other than interest, dividend or royalty income subject to non-resident withholding tax) made to the beneficiary, tax has been deducted and remitted to us, the amount of the credit claimed for remittances made
    • if the trust is a fixed trust and at least 90% of its assets, held either directly or indirectly, are not taxable Australian property
    • if it is contended that all or part of the non-resident beneficiary’s share of the income included income of the trust derived outside Australia and while the beneficiary was not a resident          
      • the beneficiary’s share of that income
      • the basis of the contention that the beneficiary is not a resident of Australia.
       

    Also provide evidence that:

    • if no amounts have been transferred overseas, the beneficiary’s share of income has been applied for the benefit of the beneficiary or otherwise dealt with on behalf of the beneficiary
    • the beneficiary has been notified of the entitlement.

    Transactions with specified countries

    Did you send any funds or property to, or receive any funds or property from, any of the countries listed below? This includes sending or receiving funds or property indirectly, through another entity or country.

    Do you have the ability to control the disposition of any funds, property, investments, or any other assets located in any of the countries listed below? This includes:

    • funds or assets may be located elsewhere, but are controlled or managed from one of the countries listed below, and
    • where you have an expectation you are able to control the disposition of the funds or assets, or you have the capacity to control the disposition indirectly, for example, through associates.

    Print X in the Yes box for yes, or X in the No box for no at C.

    The specified countries are as follows:

    • Andorra
    • Anguilla
    • Antigua and Barbuda
    • Aruba
    • Bahamas
    • Bahrain
    • Barbados
    • Belize
    • Bermuda
    • British Virgin Islands
    • Cayman Islands
    • Cook Islands
    • Curacao
    • Cyprus
    • Dominica
    • Gibraltar
    • Grenada
    • Guernsey
    • Hong Kong
    • Isle of Man
    • Ireland
    • Jersey
    • Labuan (in Malaysia)
    • Liberia
    • Liechtenstein
    • Luxembourg
    • Marshall Islands
    • Mauritius
    • Monaco
    • Montserrat
    • Nauru
    • Netherlands
    • Niue
    • Panama
    • Sint Maarten (Dutch part)
    • Samoa
    • San Marino
    • Seychelles
    • Singapore
    • St Kitts & Nevis
    • St Lucia
    • St Vincent & the Grenadines
    • Switzerland
    • Turks and Caicos Islands
    • US Virgin Islands
    • Vanuatu.

    30 Personal services income

    In this section:

    Does your income include an individual’s personal services income?

    Personal services income (PSI) is income that is mainly a reward for an individual’s personal efforts or skills, or would mainly be such a reward if it was derived by the individual.

    A trust may derive income which includes the PSI of one or more individuals.

    Examples of PSI include income:

    • for the services of a professional practitioner in a sole practice
    • derived under a contract which is wholly or principally for the labour or services of an individual
    • for the exercise of professional skills by a professional sportsperson or entertainer
    • for the exercise of personal expertise by a consultant.

    PSI does not include income that is mainly:

    • for supplying or selling goods, for example, from retailing, wholesaling or manufacturing
    • generated by an income-producing asset, for example, from operating a bulldozer
    • for granting a right to use property, for example, the copyright to a computer program
    • generated by a business structure, for example, a large accounting firm.

    If the trust receives an individual’s PSI other than in the course of conducting a personal services business and does not promptly pay it to the individual as salary or wages:

    • the net amount of PSI is attributed to the individual and is not assessable to the trustee, and
    • certain related expenses are not deductible under the special rules.

    Print X in the Yes box at N if the income of the trust includes an individual’s PSI. Otherwise, print X in the No box at N.

    If you answered No at N, you do not need to answer any more questions.

    If you answered Yes at N, read on and complete the remaining labels at item 30.

    For more information, see TR 2021/D2 Income tax: personal services income and personal services businesses.

    In this section:

    Total amount of PSI included at item 5 income labels

    Write at A the total amount of income gained by you during the year that is PSI of one or more individuals that you have included at item 5 income labels. At this item, exclude any exempt or non-assessable non-exempt components of the PSI, for example, goods and services tax (GST).

    Total amount of deductions against PSI included at item 5 expense labels

    Write at B the total amount of expenses against PSI included at item 5 expense labels.

    Did you satisfy the results test in respect of any individual?

    If you satisfy the results test in respect of one or more individuals, print X in the Yes box at C. Otherwise, print X in the No box at C.

    You will meet the results test in an income year if, for at least 75% of the PSI of the individual doing the personal services work, having regard to the custom or work practice when work of that kind is performed:

    • the PSI is paid to achieve a result under your contract or agreement
    • you provide the tools or equipment necessary (if any) to do the work, and
    • you are liable for the cost of rectifying defects in the work performed.

    The PSI is considered to be paid to achieve a result when the individual is required to produce a specified result or outcome, and payment is conditional upon that result or outcome being achieved. The essence of the contract or agreement has to be to achieve a result and not just to do the work as required.

    Do you hold a personal services business (PSB) determination in respect of any individual?

    If you hold a personal services business (PSB) determination in respect of any individual, print X in the Yes box at D, otherwise print X in the No box at D.

    To apply for a personal services business determination, complete a Personal services business determination application.

    Did you satisfy the unrelated clients test, employment test or business premises test in respect of any individual?

    E1, E2 and E3 require information in relation to any individual for whom you did not satisfy the results test or hold a PSB determination, and where each source of their PSI income yielded less than 80% of their total PSI. If 80% or more of the PSI in the income year comes from one client (and their associates), you:

    • cannot self-assess whether you meet the unrelated clients test, employment test or business premises test, and
    • do not complete E1, E2 and E3.

    When considering the 80% rule, do not take into account income that is not PSI (for example, investment income or income from the sale of goods or the use of an income-producing asset, or income an individual received as an employee).

    If you are a commission agent your PSI will be treated as coming from each customer, provided you meet all of the following conditions:

    • You are an agent of the principal but not an employee.
    • You receive income from your principal for services that you provide to customers on the principal’s behalf.
    • At least 75% of that income is performance-based commissions or fees.
    • You actively seek other customers to whom you could provide services on the principal’s behalf.
    • You do not provide any services to the customers, on the principal’s behalf, using premises that the principal (or their associate) owns or has a leasehold interest in, unless you use the premises under an agreement entered into at arm’s length.

    If you meet all of these conditions and, as a consequence, less than 80% of the PSI is treated as coming from each customer, you can self-assess against the unrelated clients test, the employment test and the business premises test. You do not need a determination from the Commissioner to be a personal services business although you may apply for a determination if you are unsure.

    Show whether you satisfied any of the personal services business tests for any individual for whom:

    • you did not satisfy the results test or hold a PSB determination
    • each source of their PSI income yielded less than 80% of their total PSI.
    Unrelated clients test

    If you satisfied the unrelated clients test, print X in the box at E1.

    You will meet the unrelated clients test in the income year if the individual doing the personal services work generates PSI from two or more clients who are not associated with each other, or with the individual, or with you.

    The personal services must also be provided as a direct result of making offers to the public, for example, by advertising. Do not count clients obtained as a result of registering your name with a labour-hire firm, placement agency or similar organisation.

    Separate government departments are deemed not to be associates of each other for the purposes of this test.

    If you are a commission agent who meets all of the conditions for the special rules, you will pass the unrelated clients test if your services are provided to at least two customers as a direct result of your making offers or invitations to the public on behalf of your principal.

    Employment test

    If you satisfied the employment test, print X in the box at E2.

    Subject to certain exceptions below, you will meet the employment test in the income year if you:

    • have employees, engage subcontractors or engage entities that perform at least 20% (by market value) of the principal work, or
    • have apprentices for at least half the income year.

    ‘Principal’ work is the main work that generates the PSI and does not usually include support work such as secretarial duties.

    You can count a spouse or family member who does principal work, but not companies, partnerships or trusts associated with you.

    You cannot count any individual whose PSI you receive.

    Business premises test

    If you satisfied the business premises test print X in the box at E3.

    You will meet the business premises test if, at all times during the income year, you maintain and use business premises that are:

    • used mainly to conduct the work, that is, used for gaining or producing personal services income for more than 50% of the time
    • used exclusively by you
    • physically separate from premises used for a private purpose by          
      • the individual doing the personal services work
      • their associates
      • your associates, and
       
    • physically separate from the business address of your clients or their associates.

    The phrase at all times during the income year is taken to mean the whole period during which activities are conducted for the purposes of generating personal services income.

    You do not need to maintain and use the same business premises throughout the year but you must satisfy all the above criteria.

    Treatment of attributed PSI on your trust tax return

    If PSI is attributed to an individual, the income is not assessable to the trust. Include the PSI on the trust tax return as follows:

    Include the attributed amount in the amount shown at A Income reconciliation adjustments item 5, as calculated in Worksheet 1: Reconciliation statement. The attributed amounts are income subtraction amounts. If the income subtractions exceed the income add backs, the total is a negative amount. If a negative amount, print L in the box at the right of A on the tax return.

    Treatment of net PSI loss on your trust tax return

    If an individual can deduct the net PSI loss, the total amount of the deductions to which the trust is entitled is reduced by that amount. Include the PSI loss amounts on the trust tax return as follows:

    Include the net PSI loss amounts in the amount shown at B Expense reconciliation adjustments item 5 Reconciliation items, as calculated in Worksheet 1: Reconciliation statement.

    For more information, see:

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    Last modified: 27 May 2021QC 64913