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Trustee beneficiary non-disclosure tax

Last updated 14 November 2019

No correct TB statement

You (or, if you're a trustee company, you and your directors) may be liable to pay trustee beneficiary non-disclosure tax (TBNT) if you don't 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 didn't 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

In some circumstances, you may be liable to pay TBNT even if you make a correct TB statement 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 if:

  • a share of the net income is included in the assessable income of a trustee beneficiary (under section 97 of the ITAA 1936)
  • 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 trust distribution')
  • TBNT has not previously been payable in respect of that share.

Although you don’t need to make a TB statement if you are a trustee of a family trust, you are still liable to pay TBNT for circular trust distributions.

Example: Round robin distribution

'Trust A', 'Trust B' and 'Trust C' form a chain of trusts. Each is a closely held trust and is required to make a TB statement. Each trust’s trustee is a beneficiary of another trust in the chain, so: the trustee of Trust B is a beneficiary of Trust A, the trustee of Trust C is a beneficiary of Trust B, and the trustee of Trust A is a beneficiary of Trust C.

Diagram showing Trust A distributing $10,000 to Trust B, Trust B distributing $10,000 to Trust C and Trust C distributing $10,000 to Trust A.

Trust A has net income of $10,000 in an income year.

The trustee of Trust B is presently entitled to $10,000, being its share of Trust A’s net income, and includes this in its assessable income. The trustee of Trust A makes a correct TB statement advising us that the untaxed part of the trustee of Trust B's share of the net income is $10,000. Therefore, the trustee of Trust A is not liable to pay TBNT for this distribution.

Similarly, the trustee of Trust C is presently entitled to $10,000, being its share of Trust B’s net income and includes this in its assessable income. 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 pay TBNT for this distribution.

Following from this, the trustee of Trust A is presently entitled to $10,000, being its share of Trust C’s net income. This income is reasonably attributable to the $10,000 that the trustee of Trust A has reported as being distributed to the trustee of Trust B. This means that the trustee of Trust A has become entitled to a share of its own net income.

Therefore, as the trustee of Trust A is presently entitled to an amount reasonably attributable to the whole of the untaxed part of this share of its own net income, and TBNT has not previously been payable in respect of this share (by the other trustees in the chain), the trustee of Trust A is 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 your trust 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're a trustee company, you or any of your directors) may seek to recover TBNT (or related GIC) from a trustee beneficiary if:

  • the trustee beneficiary either  
    • refused or failed to give you information relating to the TB statement when asked to do so, or
    • provided incorrect information relating to the TB statement and you honestly believed on reasonable grounds that it was correct
  • you've distributed an amount representing some, or all, of the share of net income to them without withholding TBNT, and
  • you've paid some or all of the TBNT (or related GIC).

See also:

QC21157