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  • PAYG instalments for trusts

    If you're the beneficiary of a trust and you're a pay as you go (PAYG) instalments payer, there are special rules to work out your instalment income and how much you need to pay.

    When you lodge your tax return, all the amounts you've paid during the year will be offset against any tax you owe for the year.

    Find out about:

    Calculating your instalments

    Using the instalment amount (option 1)

    If you use the instalment amount (option 1), we'll work out your instalments and then you pay the amount we calculate.

    Using the instalment rate (option 2)

    If you use the instalment rate (option 2), the instructions below will help you work out your share of the trust's instalment income. You'll include this as your instalment income on your activity statement.

    Next steps:

    Trust categories

    The rules for working out your share of instalment income differ depending on the type of trust:

    Broadly held resident investment unit trusts

    When a trust meets the strict requirements to be a broadly held resident investment unit trust and it has more than 50 unit-holders, the beneficiaries record their trust income on a cash basis.

    If you are a beneficiary of this type of trust, your instalment income must include any amount the trust has distributed to you, or applied for your benefit, in the instalment period. You must include the amount even if it is:

    • assessable income for an earlier or later year
    • trust income or trust capital.

    Absolutely entitled trusts

    An absolutely entitled trust must meet three tests:

    • Beneficiaries must be absolutely entitled to the assets of the trust.
    • Beneficiaries must have an interest in the trust income.
    • The only active duties of the trustee are dealing with the trust income and property, as directed by the beneficiaries.

    If you are a beneficiary of this type of trust, your instalment income includes your share of the instalment income earned by the trust in the instalment period. You work out your share based on your interest in the trust income.

    Corporate unit trusts, managed investment trusts and public trading trusts

    If you are a beneficiary of a corporate unit trust, managed investment trust or a public trading trust, your instalment income must include any amount the trust has distributed to you in the instalment period.

    Other trusts (including family discretionary trusts)

    If you are a beneficiary of a family discretionary trust or another trust type (not outlined above) you must include your share of the instalment income earned by the trust in the instalment period.

    Next steps:

    Working out your share of income

    To work out your share of the trust's instalment income use the simple formula (A ÷ B) × C, where:

    You can use the trust's most recently lodged tax return to find the information you need.

    These amounts need to be updated when:

    • a future trust tax return is lodged
    • the most recent trust tax return is amended.

    Assessable income from the trust for the last income year

    This amount is shown on the trust's tax return at item 55.

    Trust's instalment income for the last income year

    This is generally the trust's gross ordinary income. It is the total of the amounts shown on the trust's tax return at the following:

    • Item 5: Other business income (label G)
    • Item 8: Distribution from partnerships (labels A and B) and Distribution from trusts (labels Z, R and F)
    • Item 9: Gross rent (label F)
    • Item 10: Forestry managed investment scheme (label Q)
    • Item 11: Gross interest (label J)
    • Item 12: Dividends received (labels K and L)
    • Item 14: Other Australian income (label O)
    • Item 23: Other assessable foreign source income (label B)
    • Item 31: Taxation of financial arrangements (TOFA) (see note 1)

    Note 1: If the trust is a Taxation of financial arrangements (TOFA) entity, only include the 'net TOFA amount'. The net TOFA amount is TOFA gains (label M) minus TOFA losses (label N). If the net TOFA amount is

    • positive – subtract the TOFA losses (label N) from the sum of the labels
    • negative – subtract the TOFA gains (label M) from the sum of the labels.

    Trust's instalment income for the current period

    You should get this amount from the trustee or the trust's records for each instalment period.

    There may be times when the result is zero, for example because the trust had a loss in an earlier year. In these cases, you must estimate a fair and reasonable amount of current instalment income from the trust.

    The following example demonstrates how to work out your share of your trust's instalment income. You can then use the worksheet below to work it out for your situation. If you are a beneficiary of more than one trust, you must include an amount for each trust.

    Next steps:

    Example

    This example is based on the Trust tax return.

    Example: Working out your share of your trust's instalment income

    Jill conducts a clothing business as a sole trader. She is also one of three beneficiaries of a discretionary trust operating a building business.

    Jill is required to pay PAYG instalments. She has chosen to pay using Option 2 (instalment rate × instalment income) and we have notified her of an instalment rate.

    Jill needs to work out her share of instalment income from the trust.

    To use the formula (A ÷ B) × C, Jill needs to know:

    • A: assessable income from the trust for the last income year
    • B: the trust's instalment income for the last income year
    • C: the trust's instalment income for the current period.

    Jill gets the first two amounts from the trustee or from the trust's tax return for the most recent year, and enters it into the worksheet as follows.

    Step 1: Assessable income from the trust will be shown at item 55 label B (Share of income – Non primary production). In Jill's case this is $45,000.

    Step 2: The trust's instalment income is the trust's gross ordinary income. It is the total of the amounts shown at the following:

    • Item 5: Business income and expenses. For Jill, the amount at label G (Other business income) is $200,000.
    • Item 8: Partnerships and trusts. For Jill, the amount at label (Non-primary production – Distribution from partnerships, less foreign income) is $4,000.
    • Item 9: Rent. For Jill, the amount at label F (Gross rent) is $5,400.
    • Item 10: Forestry managed investment scheme income. For Jill, the amount at label Q is zero.
    • Item 11: Gross interest, including Commonwealth Government loan interest. For Jill, the amount at label J is $230.
    • Item 12: Dividends. For Jill, amount at label K is zero and the amount at label L (Franked amount) is $56.
    • Item 14: Other Australian income. For Jill, the amount at label O is $200.
    • Item 23: Other assessable foreign source income. For Jill, the amount label B is zero.
    • Item 31: Taxation of financial arrangements (TOFA). The amount at labels M and N are zero (see note 2).

    Note 2: As the trust in this example is a mature TOFA entity, only the 'net TOFA amount' needs to be included in instalment income. This is calculated by deducting the gross TOFA income from the instalment income, then adding the 'net TOFA amount'. The net TOFA amount is TOFA gains (label M) minus TOFA losses (label N). Jill only includes this amount if it is positive.

    Therefore, the total trust instalment income for the last income year is:

    • $200,000 + $4,000 + $5,400 + $230 + $56 + $200 = $209,886

    Step 3: The trust's instalment income for the current period is $69,400. This amount is for building services.

    Therefore, Jill's proportion of the trust's instalment income for the quarter is:

    ($45,000 ÷ $209,886) × $69,400 = $14,879

    Jill needs to add this amount to the instalment income from her clothing business to work out her total instalment income for the period.

    End of example

    Worksheet

    You can use the worksheet below to work out your own share of your trust's instalment income. This worksheet is based on the Trust tax return.

    Download the Trust instalment income worksheet (XLS, 13KB).

    Next steps:

    See also:

      Last modified: 29 Jul 2019QC 16276