Trusts

Appointment of public officer

If a trust carries on a business in Australia or derives income from property in Australia and there is no trustee who is an Australian resident, the trustee generally appoints a public officer. The public officer must be a natural person of at least 18 years of age residing in Australia and who is capable of understanding the nature of their appointment as the public officer. The appointment of a public officer is made by giving written notice, specifying the name and address of the public officer, to the Commissioner.

The trust does not need to appoint a public officer if the Australian income of the trust consists solely of dividends, interest and/or royalties subject to withholding tax, or the Commissioner has granted an exemption in writing.

If the trustee does not appoint a public officer they may be prosecuted. A fine of up to $170 (one penalty unit) may be imposed for each day that the trustee fails or neglects to meet the requirements.

The public officer is answerable for doing everything required to be done by the trustee under the ITAA 1936, the ITAA 1997 or the Regulations. A public officer who defaults on any of these duties is liable to the same penalties as the trustee.

Lodging a trust tax return

A notice advising which entities are required to lodge tax returns is published annually in the Federal Register of Legislative Instruments. To find it, visit ComLawExternal Link, then select 'Legislative instruments' – 'Current' – 'Lo'.

For most trusts, the trust income tax return is due to be lodged on or before 31 October 2013. The Commissioner may allow later lodgment dates in certain circumstances: see Key lodgment dates for businesses.

If no trustee is resident in Australia, the trust tax return is lodged by the public officer of the trust or, if a public officer does not need to be appointed, by the trust’s agent in Australia.

If a trust has derived income, irrespective of the amount of income derived, a trust will have to lodge a return unless exempted by the Commissioner.

However, a trust tax return is not required if the trust was a subsidiary member of a consolidated group for the full income year. Where this is the case, the head company of the group will have the responsibility for reporting any trust income in its tax return and for preparing any necessary schedules.

If the trust is a corporate unit trust or a public trading trust, they are taxed as companies and, as a result, are required to lodge a Company tax return 2013.

For children’s saving accounts, see TR 2486 Income tax: children’s savings accounts.

Keep a copy of the trust tax return and related documents, as there may be a charge for obtaining a copy from us.

Our address to lodge tax returns is:

The following are the only schedules that are sent with the trust tax return:

• Capital gains tax (CGT) schedule 2013 (NAT 3423)
• Family trust election, revocation or variation 2013 (NAT 2787)
• International dealings schedule 2013 (NAT 73345)
• Interposed entity election or revocation 2013 (NAT 2788)
• Losses schedule 2013 (NAT 3425)
• Non-individual PAYG payment summary schedule 2013 (NAT 3422).

At various questions you may be instructed to attach additional information to the tax return. If you are instructed to provide a statement on a separate sheet of paper showing particular information (for example, the type and amounts of a claim for a tax offset) include a heading indicating which question or item the information relates to, sign the statement, attach it to the tax return and print X in the Yes box at Have you attached any ‘other attachments’? at the top of page 1 of the tax return.

Do not send other schedules or documents with your tax return unless instructed to attach them as ‘other attachments’. Keep any other schedules or documents with the trust’s tax records. Tax returns lodged without all the required schedules may not be considered to have been lodged in the approved form. Unless the trust tax return and all required schedules are lodged by the due date, a failure to lodge on time penalty may be applied.

International dealings schedule

Where relevant information is reported in the trust tax return at item 22 Attributed foreign income, item 29 Overseas transactions/thin capitalisation you must complete an International dealings schedule 2013 (NAT 73345).

For more information, see International dealings schedule instructions 2013.

Tax offsets

A beneficiary may be entitled to claim certain tax offsets, such as those for:

• a dependent spouse (without dependent child or student)
• medical expenses
• private health insurance
• seniors and pensioners
• national rental affordability scheme (NRAS) tax offset
• foreign income tax offset.

For more information, see Individual tax return instructions 2013.

If a trustee is assessable on behalf of a beneficiary who is presently entitled but under a legal disability, the trustee may be entitled to tax offsets to which that beneficiary would be entitled. Provide a statement on a separate sheet of paper showing the type and amounts of any claim for a tax offset. Sign the statement, attach it to the tax return and print X in the Yes box at Have you attached any ‘other attachments’? at the top of page 1 of the tax return.

The income tests to assess eligibility have changed for the following offsets:

• a dependent spouse (without dependent child or student)
• seniors and pensioners.

If you are claiming a dependent spouse tax offset, you will need to work out the beneficiary’s adjusted taxable income and their spouse’s adjusted taxable income, see question T1 in Individual tax return instructions 2013.

If you are claiming the seniors and pensioners tax offset, you will need to work out the beneficiary’s rebate income and include this on the statement attached to the trust return, see question T2 in Individual tax return instructions 2013.

Where eligible, the trustee will claim the Conservation tillage refundable tax offset in the trust tax return for the year at item 51 Other refundable tax offsets: the offset claim does not flow directly to beneficiaries of the trust. For more information, see Conservation tillage refundable tax offset.

Net medical expenses tax offset

Where a trustee is assessed under section 98, the amount of net medical expenses tax offset a trustee can claim on behalf of the beneficiary depends on the beneficiary’s share of the trust net income, spouse’s adjustable taxable income (if any) and family status.

Where the beneficiary’s share of the trust net income plus their spouse’s adjusted taxable income (if any):

• does not exceed $84,000 for singles or $168,000 for a couple or family (plus $1,500 for each dependent child after the first), the trustee can claim an offset of 20% for eligible out of pocket expenses incurred by the beneficiary in excess of $2,120.
• exceeds $84,000 for singles or $168,000 for a couple or family (plus $1,500 for each dependent child after the first), the trustee can claim an offset of 10% for eligible out of pocket expenses incurred by the beneficiary in excess of $5,000.

To claim the net medical expenses tax offset, work out the beneficiary’s total net medical expenses and provide it in a statement attached to the trust return. For more information see question T6 in Individual tax return instructions 2013 or the Net medical expenses tax offset calculator.

The statement is to be provided on a separate sheet of paper and show:

• trust’s name
• trust’s TFN
• beneficiary’s name
• beneficiary’s TFN
• beneficiary’s share of trust net income
• the amount of total net medical expenses claimed by, or on behalf of, the beneficiary
• full name of beneficiary’s spouse, if they had a spouse on 30 June
• spouse’s adjusted taxable income, if applicable
• number of the beneficiary’s dependent children, if applicable.

Sign the statement, attach it to the tax return and print X in the Yes box at Have you attached any ‘other attachments’? at the top of page 1 of your trust tax return.

The ATO will calculate the amount of offset the beneficiary is entitled to receive based on the information provided.

At the time of publishing these changes had not become law. For further information, go to ato.gov.au and search for Net medical expenses tax offset.

Private health insurance tax offset

If you are a trustee who is assessable on behalf of a beneficiary who is presently entitled but under a legal disability (see section 98 of the ITAA 1936) and the beneficiary is entitled to a tax offset under the private health insurance rebate, you can claim the tax offset for this rebate up to the value of any tax payable. To do this, provide a statement on a separate sheet of paper showing:

• trust's name
• trust's TFN (tax file number)
• beneficiary’s name
• beneficiary’s TFN
• beneficiary’s share of the net income of the trust estate
• beneficiary’s spouse’s income for surcharge purposes (if they had a spouse on 30 June 2013)
• for each policy
  • ‘Health insurer ID’ from label B on the beneficiary’s health insurance statement
  • ‘Membership number’ from label C on the beneficiary’s health insurance statement
  • ‘Your share of premiums paid in the financial year’ from label J on the beneficiary’s health insurance statement
  • ‘Your share of Australian Government Rebate received’ from label K on the beneficiary’s health insurance statement
  • ‘Benefit code’ from label L on the beneficiary’s health insurance statement
  • tax claim code (refer to Private health insurance policy details in Individual tax return instructions 2013)
  • number of beneficiary’s dependent children who are under 21 years old or full-time students under 25 years old.
   

Sign the statement, attach it to the trust tax return and print X in the Yes box at Have you attached any ‘other attachments’? at the top of page 1 of the tax return.

Age-based percentage rebates apply to premiums paid for appropriate private health insurance cover provided on or after 1 April 2005. Details of the rebate levels are on the annual Private Health Insurance Statement issued by your health insurer.

For more information on private health insurance, see Private health insurance policy details in Individual tax return instructions 2013 (NAT 71050).

Special cases

Corporate unit trusts and public trading trusts are taxed as companies, and so are required to lodge a Company tax return 2013. These entities are defined below and must apply for a company TFN.

The trust loss provisions of Schedule 2F to the ITAA 1936 apply to corporate unit trusts and public trading trusts (even though they are taxed as companies), except where the corporate unit trust or public trading trust is participating in the consolidation regime for taxing wholly owned groups as a single income tax entity.

For more information about the trust loss provisions, see appendix 8.

For detailed information about the treatment of losses under consolidation, see the Consolidation reference manual: select ‘Part C – Detailed information’ - ‘C9 – Determine tax liabilities, determine obligations’ – ‘C9-5-110’.

Corporate unit trusts

A trust is a corporate unit trust for an income year if:

• the trust is a public unit trust
• under an arrangement, a business or property previously carried on or owned by a company is transferred to the unit trust and the shareholders of the company are entitled to take up units in the unit trust, and
• the trust is either a resident unit trust or was a corporate unit trust in a previous income year.

A public unit trust for this purpose is a trust whose units are listed on a stock exchange or offered to the public or held by 50 or more persons. A unit trust is not a public unit trust if 20 or fewer persons hold 75% or more of the beneficial interest of the income or the property of the trust.

A unit trust is a resident unit trust for an income year if, at any time during the income year:

• either
  • any property of the unit trust was situated in Australia, or
  • the trustee of the unit trust carried on business in Australia
   

and

• either
  • the central management and control of the unit trust was in Australia, or
  • one or more persons who were residents held more than 50% of the beneficial interests in the income or the property of the unit trust.
   

Public trading trusts

A trust is a public trading trust, if:

• the trust is a public unit trust
• the trust is a trading trust
• either
  • the trust is a resident unit trust, defined as above under corporate unit trust, or
  • the trust was a public trading trust in a previous income year
   

and

• the trust is not a corporate unit trust.

A public unit trust for this purpose is a trust any of whose units are listed on a stock exchange or offered to the public or whose units are held by 50 or more persons, except where 20 or fewer persons hold or have the right to hold 75% or more of the beneficial interests in the income or property of the trust, and the Commissioner does not consider it reasonable to treat the trust as a public unit trust.

In addition, a unit trust is a public unit trust if one or more entities exempt from tax, or complying superannuation funds, complying approved deposit funds (ADF), or pooled superannuation trusts (PST) hold or have the right to hold 20% or more of the beneficial interests in the income or property of the trust, or are paid or credited with 20% or more of the moneys paid or credited by the trustee to the unit holders, or an arrangement exists whereby the two outcomes just outlined could have been obtained.

Broadly speaking, a trading trust for this purpose is a trust whose trustee:

• carries on a trading business, or
• controls, or is able to control, the carrying on of a trading business by another person.

A trading business for this purpose is a business that does not consist wholly of ‘eligible investment business’ consisting of:

• investing in land for rent
• investing or trading in loans, securities, shares, units in a unit trust, futures contracts, forward contracts, interest rate swap contracts, currency swap contracts, forward exchange rate contracts, forward interest rate contracts, life assurance policies, or rights or options in any of these, or
• investing or trading in other financial instruments that arise under financial arrangements (other than certain excepted arrangements).

From the 2008–09 income year there is a 2% safe harbour allowance at the whole of trust level for non-trading income and for investments in land there is a 25% safe harbour allowance for non-rental, non-trading income from those investments. However, the trustee of a unit trust may choose not to apply those safe harbours.

Annual investment income reporting

Managers of unit trusts that are investment bodies for the purposes of Part VA of the ITAA 1936 may be required under regulation 56 of the Income Tax Regulations 1936 (ITR 1936) to lodge an Annual investment income report if they made distributions to unit holders during the year. The report requires details of distributions, including the amounts paid and the names of the payees. For more information, phone 1800 072 681.

Payment arrangements

Paying your tax debt

Income tax debts must be paid by the due date.

You can make payments by one of the five methods explained in How to pay. For more information, phone 1800 815 886.

If the trust tax return is lodged on time, any tax payable by the trustee is due on the later of:

• 21 days after the due date for lodgment of the tax return specified in the legislative instrument registered on the Federal Register of Legislative Instruments, or
• 21 days after receipt of the notice of assessment.

If the trust tax return is lodged late or not at all, any tax payable by the trustee is due 21 days after the due date for lodgment.

The general interest charge (GIC) accrues on outstanding amounts from the due date for payment.

For more information on the GIC, phone 13 28 66.

What if you cannot pay your tax debt by the due date?

If you cannot pay your tax debt by the due date, phone Account management on 13 11 42 to avoid action being taken to recover the debt.

We expect you to organise your affairs to ensure that you can pay your debt on time. However, we may allow you to pay your debt under a mutually agreed payment plan if you have genuine difficulty paying your debt on time but have the capacity to eventually pay the debt. The GIC will continue to accrue on any outstanding amounts of tax during any payment arrangement.

In some circumstances the trustee may need to provide details of the trust’s financial position, including a statement of its assets and liabilities and details of income and expenditure. We will also want to know what steps the trustee has taken to obtain funds to pay its tax debt and the steps the trustee is taking to meet future tax debts on time.