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  • Trusts

    Disposal of a trust asset (or another CGT event) is likely to result in a capital gain or loss for the trust (unless a beneficiary is absolutely entitled to the asset).

    Capital gains and losses are taken into account in working out the trust's net capital gain or net capital loss for an income year. As part of the net income of a trust, the net capital gain for the year is then allocated proportionately to beneficiaries based on their entitlements to trust income – unless:

    • there is a beneficiary who has been made specifically entitled to the capital gain (in which case they're generally assessed on the gain), or
    • the trustee (of a resident trust) chooses to be taxed on a capital gain.

    If there is no beneficiary presently entitled to income (or specifically entitled to the capital gain) the trustee is generally taxed on the capital gain at a special rate (equivalent to the highest marginal rate) and is not entitled to the CGT discount (under section 99A of the ITAA 1936). However, in certain circumstances, such as deceased estates, the Commissioner can apply the normal resident individual tax rates (and the CGT discount will also apply) where it would be unreasonable to apply the special rate.

    Capital losses made by a trust can't be distributed to the trust’s beneficiaries but they can be carried forward and applied against the trust's capital gains in future years.

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    Last modified: 01 Jul 2020QC 52235