These instructions will help you complete the Trust tax return 2016. They are not a guide to income tax law. You may need to refer to other publications.
When we say you or your business in these instructions, we mean either you as the trust that conducts a business, or you as the registered tax agent or trustee responsible for completing the tax return.
These instructions contain abbreviations for names or technical terms. Each term is spelt out in full the first time it is used and there is a list of abbreviations.
What’s new?
Net medical expenses tax offset
The phase out of this offset continues. From 1 July 2015, expenses you can claim under this offset are now restricted to disability aids, attendant care and aged care. For more information, see Question T5 in the Individual tax return instructions supplement 2016.
Exploration development incentive
The Exploration development incentive (EDI) encourages shareholder investment in small exploration companies undertaking greenfields mineral exploration in Australia.
The scheme enables eligible exploration companies to give up a portion of their tax losses from greenfields exploration to create and issue exploration credits to their shareholders. Certain Australian resident investors will be entitled to a refundable tax offset for the exploration credits that they receive,
Exploration credit tax offsets are shown at items 51 and 54.
See also:
Small business income tax offset
From 2015-2016, a beneficiary who is an individual may be entitled to a tax offset on the tax payable on their share of net small business income earned by a trust that is a small business entity.
Trusts that are small business entities will need to work out the trust’s net small business income and the beneficiary’s share of that income.
Business services wage assessment tool (BSWAT) payment
If a beneficiary who is an individual has received a lump sum in arrears BSWAT payment, they may claim a lump sum in arrears tax offset.
The BSWAT lump sum in arrears payment is not salary and wages or an Australian government pension or allowance. To claim the lump sum tax offset, report the payment at 14 Other Australian income.
See also:
- 24 Other income in the Individual tax return instructions supplement 2016
- The BSWAT payment scheme - what it means for you
Expanding accelerated depreciation for small businesses
New laws have passed that allow small businesses to claim an immediate deduction for assets they first acquire and start to use, or have installed ready for use, provided each depreciable asset costs less than $20,000. This will temporarily replace the previous instant asset write-off threshold of $1,000.
This measure started 7.30pm (AEST) 12 May 2015 and will end on 30 June 2017.
The balance of the general small business pool is also immediately deductible if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2017 (including an existing general small business pool).
The 'lock out' laws have also been suspended for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out) until the end of 30 June 2017.
Immediate deductibility for start-up costs
Section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) allows for certain start-up expenses, including costs associated with raising capital, to be immediately deductible where they are incurred by a small business entity or an entity that is not in business. These provisions apply from 2015–16.
A new tax system for managed investment trusts
The Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015External Link (the Bill), which proposes a new tax system for managed investment trusts (MITs), was introduced into Parliament on 3 December 2015.
If enacted, the proposed rules will apply from 1 July 2016. However, a trustee of a MIT can choose to apply the rules from 1 July 2015.
The new system proposes the following:
- allowing eligible MITs to use an attribution method of taxation (in lieu of the existing present entitlement to income method)
- including a rule to allow MITs to carry forward under- and over-distributions into the next income year, without adverse taxation consequences
- deeming as fixed trusts those MITs that meet eligibility requirements
- allowing unit holders to make, in certain circumstances, adjustments (including upward) to the cost base of their unit holdings to eliminate double taxation that may otherwise arise
- introducing an arm’s length rule that aims to ensure that related entities undertake transactions between one another in a manner that reflects commercial dealings
- amending the 20% tracing rule for public unit trusts so it does not apply to super funds and exempt entities that are entitled to a refund of excess imputation credits.
At the time of publication, these changes had not become law.
General information
Australian Business Register
We are authorised by the A New Tax System (Australian Business Number) Act 1999 and other taxation laws to collect certain information relating to your entity. We may use business details supplied on the tax return to update the information held in the Australian Business Register (ABR) in relation to your entity. This may include cancelling the ABN if your entity is no longer entitled to be registered in the ABR.
Where authorised by law, selected information on the ABR may be made publicly available and some may be passed on to other Commonwealth, state, territory and local government agencies. These agencies may use ABR information for purposes authorised by their legislation, or for carrying out other functions of their agency. Examples of possible uses include registration, reporting, compliance, validation and updating of databases.
You can find details of agencies that regularly receive information from the ABR at abr.gov.auExternal Link or you can phone us on 13 92 26 between 8.00am and 6.00pm Monday to Friday to have a list of the agencies sent to you.
See our privacy statementExternal Link for more information about:
- privacy
- the information we collect
- how it may be used.
Foreign exchange (forex) gains and losses
Under the forex measures (Division 775 of the ITAA 1997) and the general translation and functional currency rules (Subdivisions 960-C and 960-D of the ITAA 1997), forex gains and losses are generally brought to account as assessable income or allowable deductions when realised. The forex measures cover both foreign currency denominated arrangements and, broadly, arrangements to be cash-settled in Australian currency with reference to a currency exchange rate. Forex gains and losses of a private or domestic nature, or in relation to exempt income or non-assessable non-exempt income, are not brought to account under the forex measures.
If a forex gain or loss is brought to account under the forex measures and under another provision of the tax law, it is assessable or deductible only under the forex measures.
Generally, where the TOFA rules apply to the forex gains and losses of a trust then those gains and losses will be brought to account under those TOFA rules instead of the forex measures.
Additionally, forex gains and losses will generally not be assessable or deductible under the forex measures if they arise from certain acquisitions or disposals of capital assets, including CGT assets and depreciating assets, and the time between the acquisition or disposal and the due date for payment is no more than 12 months. Instead, any forex gain or loss is usually matched with or integrated into the tax treatment of the underlying asset.
The general translation rule requires all tax-relevant amounts to be expressed in Australian currency regardless of whether there is an actual conversion of that foreign currency into Australian dollars.
The tax consequences of forex gains or losses on foreign currency assets, rights and obligations that were acquired or assumed before 1 July 2003 are determined under the law as it was before these measures came into effect, unless:
- you have made a transitional election that brings these arrangements under the forex measures, or
- there is an extension of an existing loan (for example, an extension by a new contract or a variation to an existing contract) that brings the arrangement within these measures.
See also: