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Capital gains

Last updated 12 October 2020

If not prevented by the trust deed, a trust's capital gain can be streamed to beneficiaries for tax purposes (even if they don't have a present entitlement to trust income) by making them specifically entitled to the gain. A trustee has until two months after the end of the income year in order to make a beneficiary specifically entitled to a capital gain (ordinarily, this is 31 August).

The trustee of a resident trust may also choose to be assessed on a capital gain if no beneficiary has received or benefited from any amount relating to the gain during, or within two months of the end of, the income year. This allows a trustee to choose to pay tax on behalf of a beneficiary who is unable to immediately benefit from the gain.

Where no beneficiary has a specific entitlement to all or part of a capital gain, and the trustee has not chosen to be assessed on it, the capital gain is allocated to beneficiaries according to their present entitlements to trust income under Division 6 of Part III of the ITAA 1936. Any part of a capital gain that isn't allocated to a beneficiary in this way is allocated to the trustee.

A beneficiary who has a capital gain streamed to them is treated as having an extra capital gain that they will then take into account in working out their own net capital gain for the income year.

Capital gains of a trust are allocated to beneficiaries and the trustee in accordance with the rules in Subdivision 115-C of the ITAA 1997, which apply from the 2010-11 year.