8 Partnerships and trusts

The trust's income from a partnership includes income or a loss which the trust received, was entitled to receive or was entitled to deduct in respect of that partnership.

The trust's income from other trusts includes the trust's share of the net income (for tax purposes) of the other trusts which generally corresponds to the percentage share of the other trust's distributable income which the trust received or was entitled to receive as a beneficiary under a will, settlement, and deed of gift or other instrument of trust.

Distributions from partnerships or shares of the net income of other trusts may include or be attributable to the partnership or trust's share of any:

• TFN amounts withheld from interest, dividends and unit trust distributions
• franking credits attached to franked dividends received indirectly from an Australian franking company, or
• amounts withheld where an ABN was not quoted.

Copy the details from any statements of distribution or advice received from the partnerships and other trusts to New Worksheet 2. This is the trust's record if we need more details later.

To the extent that family trust distribution tax (FTDT) has been paid on income; or capital to which the trust is presently entitled or has been distributed from received from a partnership or other trust, an amount is excluded from the assessable income of the trust under section 271-105 of Schedule 2F to the ITAA 1936.

For more information about the circumstances in which FTDT is payable, see Family trust distribution tax.

If the trust receives or is presently entitled to a share of income which includes an amount, received indirectly from a closely held trust, on which trustee beneficiary non-disclosure tax (TBNT) has been paid, you do not need to include the amount in the trust's assessable income.

Any losses or outgoings incurred in deriving an amount that is excluded from assessable income because FTDT or TBNT has been paid are not deductible. The trust cannot claim a tax offset for any franking credits attributable to the whole or a part of a dividend that is excluded from assessable income under these provisions.

Primary production

Distribution from partnerships

Show at A the amount of primary production income or loss distribution from partnerships.

If this amount is a loss, print L in the box at the right of the amount.

Distribution from trusts

Show at Z the trust's share of primary production income which has been included in the net income (for tax purposes) of other trusts. The statement of distribution or advice from the other trusts(s) should separately show this amount. This amount should include the trust's share of primary production income which has been included in the net income of other trusts where the trust became presently entitled to primary production income of other trusts in the income year but has not yet received it.

If the trust's share of primary production included in the net income of other trusts is zero because the other trust has made a loss from its primary production activities, print L in the box at the right of the amount. Show a loss at Z only if it is a component of an overall distribution of net income from the same trust.

If this amount is not a loss, in the box at the right of Z print the code from Table 1 that best describes the type of trust from which the distribution is made. If this amount is from more than one type of trust, print the code that represents the trust with the greatest amount of distribution.

Deductions relating to distribution in A and Z

Show at S the trust's deductions for its own expenses relating to primary production distributions from partnerships. Also show at S the trust's deductions for its own expenses in deriving its share of primary production income which has been included in the net income (for tax purposes) of other trusts. Note that expenses incurred on behalf of those other trusts are not able to be deducted by the trust.

If you have prepaid any expenses, the amount that you can claim at S may be affected by the prepayment provisions. For more information, see Deductions for prepaid expenses 2011.

Expenses listed here that are costs associated with borrowing and servicing debt may not be allowable deductions under the thin capitalisation rules. For more information, see appendix 3. The disallowed amount reduces the amount that would otherwise be included at S.

Net primary production distributions

Show here the net result of adding partnership distributions of primary production income and the trust's share of primary production income that has been included in the net income (for tax purposes) of other trusts less allowable deductions related to that income.

Write the total amount in the box at Net primary production distribution. If this amount is a loss, print L in the box at the right of the amount.

Non-primary production

Distribution from partnerships, less foreign income

Show at B the amount of non-primary production income or loss from partnerships. Include any share of credit for tax withheld in Australia due to foreign resident withholding, that is attached to the distribution. (Also include the share of credit at U item 8).

If the amount at B is a loss, print L in the box at the right of the amount.

If the distribution includes franked dividends from a franking entity, check the statement of distribution or advice detailing the distribution to ensure that the amounts to be included here represent both the trust's share of the franked dividend and its share of the franking credit attached to the franked dividend. The franking credit is included at D item 8.

Do not show any dividends or franking credits indirectly received attributable to distributions from a New Zealand franking company here. If the trust received dividends or franking credits indirectly from a New Zealand franking company, see item 23 Other assessable foreign source income.

Distribution from trusts, less net capital gain and foreign income

Show at R the trust's share of the non-primary production income which was included in the net income (for tax purposes) of other trusts. The statement of distribution or advice from the other trusts should separately show this amount. Include any share of credit for tax withheld in Australia due to foreign resident withholding, that is attached to the distribution. (Also include the share of credit for tax withheld from foreign resident withholding at U item 8.)

If the trust's share of the non-primary production income included in the net income of other trusts includes an amount described as franked dividends, franked distributions or attributable franked distributions, check the statement of distribution or advice detailing the distribution to ensure that the amounts to be included at this entry represent both the trust's share of the franked distribution and its share of the franking credit attached to the franked distribution. The franking credit is also included at D item 8.

Do not show any share of another trust's non-primary production income included in the net income of that other trust that includes any dividends or franking credits indirectly received which were attributable to distributions from a New Zealand franking company at this entry, instead see item 23 Other assessable foreign source income.

In working out the trust's share of non-primary production income included in the net income (for tax purposes) of other trusts, amounts to which the trust became presently entitled in the income year but has not yet received should also be taken into account.

If this amount is a loss, print L in the box at the right of the amount. Show a loss at R only if the amount is a component of an overall distribution of net income from the same trust.

If this amount is not a loss, in the box at the right of R print the code from table 1 that best describes the type of trust from which the distribution is made. If this amount is from more than one type of trust, print the code that represents the trust with the greatest amount of distribution.

Deductions relating to distribution in B and R

Show at T the trust's deductions for its own expenses relating to non-primary production distributions from partnerships. Also show at T the trusts own expenses incurred in deriving its share of non-primary production income which has been included in the net income (for tax purposes) of other trusts. Note that expenses incurred on behalf of those other trusts are not able to be deducted by the trust.

If any expenses have been prepaid, the amount that you can claim at T may be affected by the prepayment provisions. For more information, see Deductions for prepaid expenses 2011.

Expenses listed here that are costs associated with borrowing and servicing debt may not be allowable deductions under the thin capitalisation rules. For more information, see appendix 3. The disallowed amount reduces the amount that would otherwise go at T.

If FTDT has been paid on income or capital of another trust or partnership that the trust is entitled or which has been distributed to the trust, an amount is excluded from the the trust's assessable income under section 271-105 of Schedule 2F of the ITAA 1936. Do not show this at A, Z, B or R. You cannot claim a deduction for any losses or outgoings incurred in deriving an amount which is excluded from assessable income at S or T. For more information about the circumstances in which FTDT is payable see Family trust distribution tax.

If trustee beneficiary non-disclosure tax (TBNT) has been paid in respect of an amount that would otherwise be assessable to the trust, that amount is excluded from the assessable income of the trust. Do not show that income at A, Z, B or R. You cannot claim a deduction for any losses or outgoings incurred in deriving an amount which is excluded from assessable income at S or T.

Net non-primary production distribution

Show at this entry the net result of adding the partnership distributions of non-primary production income and the trust's share of non-primary production income included in the net income (for tax purposes) of other trusts, less deductions related to that income.

Write the total amount in the box at Net non-primary production distribution. If this amount is a loss, print L in the box at the right of the amount.

Share of credits from income

Share of credit for tax withheld where ABN not quoted

If the income shown at A, Z, B or R includes any share of amounts which have had tax withheld where an ABN was not quoted, show any share of credit for the tax withheld at C. The trust or partnership statement or distribution or advice should separately disclose this amount.

Share of franking credit from franked dividends

Show at D the trust's share of any franking credits from a franking entity received indirectly through a partnership or other trust.

Show franking credits received directly from a paying franking entity at M item 12.

Do not show franking credits relating to a franked dividend received indirectly through a partnership or other trust if any of the following apply:

• They were attributable to a distribution from a New Zealand franking company. If the trust received franking credits indirectly from a New Zealand franking company, see item 23 Other assessable foreign source income.
• The holding period rule and related payments rule were not satisfied in relation to the dividend. For more information, see appendix 1.
• FTDT has been paid on the dividend paid or credited by a company which has made an interposed entity election. The dividend is excluded from assessable income under section 271-105 of Schedule 2F to the ITAA 1936. A franking credit or tax offset cannot be claimed for any franking credit attached to that dividend. For more information about when FTDT is payable, see Family trust distribution tax.
• Trustee beneficiary non-disclosure tax has been paid in respect of the dividend. A franking credit or tax offset cannot be claimed for any franking credit attached to that dividend.

Share of credit for TFN amounts withheld from interest, dividends and unit trust distributions

Unless an entity claimed an exemption or quoted a TFN, an investment body may withhold amounts from interest, dividends or income of a unit trust to which a beneficiary is presently entitled. These are called 'TFN amounts withheld'. The current rate is 46.5% of the payment made.

Show at E the trust's share of any credit for TFN amounts withheld from amounts of interest, dividends and income of unit trusts to which a beneficiary is presently entitled, that are received from partnerships or other trusts. Credits for TFN amounts withheld are allowed in the assessments of the beneficiaries or trustees.

Credit for TFN amounts withheld from payments from closely held trusts

Where a beneficiary of a closely held trust does not provide their TFN to the trustee, the trustee may be required to withhold from payments or distributions.

Show at O amounts withheld by a trustee of a closely held trust because a TFN was not provided.

Share of credit for tax withheld from foreign resident withholding

Amounts may be withheld in Australia from some payments made to certain partnerships or trusts due to the operation of the foreign resident withholding measure. These payments relate to entertainment, sports activities, construction, related activities and casino gaming junket activities.

Show at U the trust's share of any foreign resident withholding credits received from partnerships or other trusts. Ensure this amount is included in the gross distribution amount shown at B Distribution from partnerships, less foreign income or R Distribution from trusts, less net capital gain and foreign income.

Taxation of financial arrangements (TOFA)

Even if the TOFA rules apply to the trust, show at item 8 Partnerships and trusts the trust's share of all primary production and non-primary production income distributed from partnerships or included in the net income (for tax purposes) of other trusts and deductions relating to such amounts. This includes amounts from financial arrangements subject to TOFA rules.

If what you show at item 8 Partnerships and trusts includes an amount which is brought to account under the TOFA rules, also complete item 31 Taxation of financial arrangements (TOFA).