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  • Trustee beneficiary non-disclosure tax

    No correct TB statement

    You (or if you are a trustee company - you and the your directors) may be liable to pay trustee beneficiary non-disclosure tax (TBNT) if you do not lodge a correct TB statement in respect of a trustee beneficiary's share of net income within the required time. In some circumstances, a director will be excluded from liability - for example where the director did not take part in the decision not to make a correct TB statement.

    If TBNT is payable in respect of a share of net income, then that amount is not also assessed under the usual trust assessing provisions.

    Circular trust distribution

    Even if you make a correct TB statement in respect of a trustee beneficiary's share of net income, you (or if you are a trustee company - you and your directors) may be liable to pay TBNT where a share of the net income of the trust is:

    • included in the assessable income of a trustee beneficiary (under section 97 of the ITAA 1936), and
    • you become presently entitled to an amount that is reasonably attributable to the whole or a part of the untaxed part of that share (referred to as a 'round robin' or 'circular distribution').

    Example: Round robin distribution

    A chain of three trusts exists ('Trust A', 'Trust B' and 'Trust C'), each of which is a closely held trust. The trustee of Trust B is a beneficiary of Trust A, and the trustee of Trust C is a beneficiary of Trust B. The trustee of Trust A is presently entitled to the income of Trust C.

    21157 Example round robin

    Trust A has net income of $10,000 in an income year. The trustee of Trust A makes a correct TB statement advising us that the trustee of Trust B's share of that net income is $10,000. Therefore, the trustee of Trust A is not liable to TBNT in respect of that distribution.

    The trustee of Trust B also makes a correct TB statement advising us that the trustee of Trust C's share of Trust B's net income is $10,000. Therefore, the trustee of Trust B is not liable to TBNT in respect of that distribution.

    However, the trustee of Trust A is presently entitled to income of Trust C that is reasonably attributable to the share of net income of Trust A and this income has been included in the assessable income of a trustee beneficiary of Trust A (that is, the trustee of Trust B).

    Therefore, as the trustee of Trust A is presently entitled to an amount that is reasonably attributable to the whole or a part of the share of its own net income, and TBNT has not previously been payable in respect of this share, the trustee of Trust A will be liable to pay TBNT on this income.

    End of example

    Determining liability to the tax

    TBNT is payable at the rate of 47% (plus the Temporary Budget Repair Levy of 2% for the 2014–15, 2015–16 and 2016–17 financial years) on the untaxed part of a share of the net income of the trust that is included in the trustee beneficiary's assessable income.

    The amount of TBNT is reduced by the amount of any offset which you would have been entitled to if the share of net income had instead been assessed to you under section 99A.

    Where you and your directors are liable to TBNT, that liability is joint and several - it can be recovered from any of you.

    TBNT liability can be determined in two ways:

    • You can self-assess and report your TBNT liability.
    • We may raise TBNT liabilities as a result of compliance or other ATO activity. You will be issued with a notice of liability, together with a payment slip.

    When the tax is due

    TBNT is due 21 days after the end of either:

    • the due date of the trust's tax return for the income year
    • such further period as we allow.

    If TBNT remains unpaid 60 days after it is due to be paid, it will attract the general interest charge (GIC) until the full debt - tax and GIC – is paid.

    Recovering the tax

    You (or if you are a trustee company - you or any of your directors) may seek to recover TBNT (or related GIC) from a trustee beneficiary if you have distributed an amount representing some, or all, of the share of net income to them without withholding TBNT.

    You may take this action if the trustee beneficiary either:

    • refused or failed to give you information when asked to do so
    • provided incorrect information and you honestly believed on reasonable grounds that it was correct.

    See also:

      Last modified: 22 Apr 2016QC 21157