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Trust income (including exception for primary producers)

Your statement of distribution or advice from the trust should show separately your share of primary production and non-primary production income (excluding net capital gains, foreign income and franked distributions) included in the calculation of the trust's net income (for tax purposes). It will also show whether the trust made a loss in relation to either or both of these income categories. This information is needed for averaging purposes.

You show your share of:

• any primary production trust income or loss included in the calculation of the trust's net income at Net income from trusts under the Primary production section
• other trust income or loss included in the calculation of the trust's net income at the relevant section, either:  
  • Net income from trusts, less capital gains, foreign income and franked distributions or Franked distributions from trusts under the Non-primary production section ,or
  • in the sections Capital gains or losses and Foreign income, assets and entities.

If the trust made an overall loss for tax law purposes in 2018–19, the loss is retained in the trust. You will have no share of the net income of the trust. For more information, phone 13 28 61.

Your statement of distribution or advice may show that your share of the trust's net capital gain is more than the overall amount of your share of the trust's net income (for tax purposes), for example because it shows a share of primary production or non-primary production loss. In this situation, there may be a limit to the amount of the net capital gain component that you exclude from Net income from trusts, less capital gains, foreign income and franked distributions and show at the Capital gains or losses section. For more information, see the Guide to capital gains tax.

If your statement of distribution or advice shows your share of franked distributions from trusts separately, include this amount at Franked distributions from trusts, together with any share of franking credits referrable to those franked distributions. The franking credits are also shown at Franking credit from franked dividends.

Exception for primary producers

You may still be eligible for income averaging even where the trust reports a loss. While beneficiaries of fixed trusts that report a loss continue to be eligible for income averaging, beneficiaries of discretionary trusts are now required to meet some additional requirements.

Completing your claim for income averaging

If you are an eligible beneficiary and you show nothing at Net income from trusts so far, enter 0 at this field.

Professional income

If the trust income which you have received, or to which you are entitled, includes income from activities as an author of a literary, dramatic, musical or artistic work, or as an inventor, performing artist, production associate or active sportsperson, you must also enter the amount of this taxable professional income in the Other income section. Select Any other income and then Type of payment is Special professional income. You will not be taxed twice on this income.

Deductions

Remember, you cannot claim a deduction for amounts already claimed by the trust, or for expenses incurred in deriving exempt income or non-assessable non-exempt income (for example, expenses incurred in deriving distributions on which family trust distribution tax or trustee beneficiary non-disclosure tax has been paid).

If you are the beneficiary of a discretionary trust you would not normally be able to claim a deduction for expenses you incurred in relation to your share of any net income of the trust under the general deduction provisions. This is because at the time you incurred the expense, you would not have been entitled to any income of the trust.

If you made a prepayment of $1,000 or more for something to be done (in whole or in part) in a future income year, the amount you can deduct may be affected by the rules relating to prepayments. For more information on prepayments, see Deductions for prepaid expenses.

If you have incurred debt deductions, such as interest and borrowing costs, in deriving assessable income from a trust, of more than $2,000,000 (alone or combined with those of your associate entities) for 2018–19, the amount that you can deduct may be affected by the thin capitalisation rules. For more information, see Thin capitalisation.

Primary production deductions

If a trustee incurred eligible expenditure on landcare operations, water facilities, fencing assets or fodder storage assets, then only the trustee, not a beneficiary of the trust, can claim deductions for that expenditure.

Enter the total of any other deductions you can claim in relation to your share of primary production income of a trust.

For more information on deductions for expenditure on landcare operations, water facilities, fencing assets and fodder storage assets, see the Guide to depreciating assets.

Non-primary production deductions

If a trustee incurred eligible expenditure on landcare operations, only the trustee, not a beneficiary of the trust, can claim deductions for that expenditure.

Enter the total of other deductions you can claim in relation to your share of non-primary production income of a trust, including any deductions relating to franked distributions from trusts.

For more information on deductions for expenditure on landcare operations, see the Guide to depreciating assets.

Share of credits from income and tax offsets

If the trust income includes or is attributable to:

• income from which an amount of tax was withheld because an Australian business number was not quoted, then enter your share of the credit at Tax withheld where ABN not quoted
• interest, dividends and unit trust distributions from which tax file number (TFN) amounts have been withheld, then enter your share of the credit at TFN amounts withheld from interest, dividends, and unit trust distributions
• payments from a closely held trust from which TFN amounts have been withheld, then enter the total of your credits for those amounts withheld at TFN amounts withheld from payments from closely held trusts
• national rental affordability scheme (NRAS) rent, then enter your share of the NRAS tax offset at National rental affordability scheme tax offset
• other credits for tax paid by a trustee on trust income, then include the total of your share of credits for tax paid by a trustee at Tax paid by trustee. However, if you are the principal beneficiary of a special disability trust do not include your share of credits for tax paid by the trustee here. For more information, see Do not show at this section.

Also, if the trust income includes or is attributable to income that:

• you received when you were an Australian resident from which an amount of tax was withheld because of the imposition of non-resident withholding tax or managed investment trust withholding tax, or
• you derived as a foreign resident from which an amount of tax was withheld because of the operation of the foreign resident withholding rules

then enter the total amount of these credits for amounts withheld at Credit for foreign resident withholding amounts (excluding capital gains)

Franking credits

Enter your share of any allowable franking credits which you are entitled to claim as a franking tax offset through a trust at Franking credit from franked dividends.

You can only claim a share of a franking credit which relates to the share of a franked dividend paid to a trust which is indirectly included in the amount of trust income or franked distribution you show at Net income from trusts, less capital gains, foreign income and franked distributions or franked distribution you show at Franked distributions from trusts.

Therefore, you cannot claim a franking credit for a dividend paid to the trust which was exempt income or non-assessable non-exempt income (for example, a distribution on which family trust distribution tax or trustee beneficiary non-disclosure tax has been paid).

You cannot claim a share of a franking credit through a trust in the following circumstances:

• the trust has an overall loss for tax purposes for 2018–19
• you did not show an amount at Franked distributions from trusts, or
• the amount of income from the trust you have shown at Net income from trusts, less capital gains, foreign income and franked distributions is not attributable to the franked dividend which has generated the franking credit.

In addition, in order to claim a franking credit in respect of a particular dividend both you and the trustee must be qualified persons in relation to that dividend (see below).

Qualified person

There are rules, known as franking credit trading rules, designed to prevent the use of franking credits by persons who only briefly own their shares or who do not effectively own their shares. Under these rules, known as the 'holding period rule' and the 'related payments rule', you must satisfy certain criteria before you are considered to be a qualified person.

If you derived dividends indirectly through a trust (except a widely held trust) you need to determine what component of the trust net income is attributable to a particular dividend, and then determine whether you have satisfied the holding period rule and the related payments rule in relation to that dividend.

The trustee must also have satisfied these two rules.

The holding period rule applies to shares bought on or after 1 July 1997. It applies to you if you (or the trust) sold shares within 45 days of buying them. It also applies to you if you (or the trust) entered into a risk reduction arrangement, such as a derivative transaction, within that time. The holding period is 90 days for certain preference shares.

The related payments rule applies to arrangements entered into after 7.30pm (Australian Eastern Standard Time) on 13 May 1997. It applies to you (or the trust) if you were under an obligation to make a related payment for a dividend and you did not hold your shares 'at risk' during a specified qualifying period.

Special rules apply if you are the beneficiary of a trust and the trustee has made a family trust election.

If you are a beneficiary in a widely held trust, you are treated as holding an interest in all the shares or interests held by the trust. You are only required to satisfy the 45-day rule in relation to your interest in the trust as a whole, rather than in relation to each share in which you had an interest under the trust. The trustee should be able to advise if a particular trust qualifies as a widely held trust.

If you failed to satisfy the holding period rule, and the related payments rule does not apply to you, you may still be entitled to a franking tax offset if you qualify for the small shareholder exemption. The small shareholder exemption applies provided that you do not exceed the franking tax offset ceiling of $5,000 on all your franking tax offset entitlements in a given year, whether received directly or indirectly through a trust.

If any of these measures are likely to affect you, see You and your shares.

Tax paid by trustee

Non-resident trust

If you were an Australian resident, you may be able to claim a credit for Australian withholding tax you have borne on any Australian:

• source dividend
• interest
• royalty, or
• payment from an Australian managed investment trust included in the income of a non-resident trust to which you are entitled. A non-resident trust is a trust which, for all of the income year
  • only has non-resident trustees, and
  • has its central management and control outside Australia.

Legal disability

If you were under a legal disability you may be able to claim a credit for the tax that the trustee has paid on your share of the trust's net income. You are considered to be under a legal disability if you:

• were under 18 years old on 30 June 2019
• are a person who is bankrupt, or
• have been declared legally incapable because of a mental condition.

Foreign resident

If you were not an Australian resident you may be able to claim a credit for the tax that the trustee has paid on your share of income from a resident trust.

Other things to consider

New Zealand franking companies

If you have received, or are entitled to, an amount of income from a trust which includes a dividend with Australian franking credits from a New Zealand franking company, you may be eligible to claim Australian franking credits. However, you cannot claim New Zealand imputation credits. For more information, see Other foreign income. 

Capital gains

If the trust income which you have received or are entitled to includes an amount described as tax-free, tax deferred, tax exempted or as a capital gains tax (CGT) concession, then read the information on non-assessable payments in Guide to capital gains tax.

While such amounts may not need to be included at this section, they may be relevant in determining the amount of a net capital gain you show at Capital gains or losses or may affect the cost base of your unit or trust interest.

Foreign residents

If you are a foreign resident who has received a fund payment from a managed investment trust on which an amount was withheld, see Withholding tax arrangements for managed investment trust fund payments.

Special disability trusts

If you are the principal beneficiary of a special disability trust you are considered to be entitled to all of the income of the trust.