22 Attributed foreign income
For information on calculating the amounts shown at label M Listed country and label X Unlisted country, see Foreign income return form guide.
Where the trust is a member of a consolidated group or MEC group for the whole income year and derived foreign income, the responsibility for preparing the schedule will rest on the head company of the group.
Where a return is required because the trust had a period in the income year when it was not a member of a consolidated group or MEC group (a non-membership period) the trust should complete an International dealings schedule 2023 where it has derived foreign income attributable to the non-membership period.
For more information, see Consolidation reference manual, C9-5-110.
Did you have overseas branch operations or a direct or indirect interest in a foreign trust, foreign company, controlled foreign entity or transferor trust?
With the repeal of the foreign investment fund rules, foreign trust in this context refers to a controlled foreign trust.
Overseas branch operations include:
- business operations carried on by an Australian resident entity at or through a fixed place of business in another country
- business operations carried on by a foreign resident entity at or through a fixed place of business in Australia.
Direct or indirect interests in a controlled foreign company or a controlled foreign trust are taken to have the same meaning as set out in Division 3 of Part X of the ITAA 1936. For the purposes of the controlled foreign company rules, do not trace interests through another Australian entity. For example, if your trust has an interest in an Australian trust, which owns a controlled foreign company, your trust is not regarded as having a direct or indirect interest in the controlled foreign company although your trust must still include any attributable income to which it was presently entitled at item 22 Attributable foreign income.
A trust has an interest in a transferor trust if the trust has ever made, or caused to be made, a transfer of property or services to a non-resident trust. Transfer of property and services is defined in section 102AAB of the ITAA 1936.
Sections 102AAJ and 102AAK of the ITAA 1936 provide guidance on whether there was a transfer, or a deemed transfer, of property or services to a non-resident trust.
If the answer to this question is yes, print X in the Yes box at label S. Attach the completed International dealings schedule 2023 to the tax return.
Print X in the Yes box at Have you attached any 'other attachment'? at the top of page one of the tax return.
If the answer to this question is no, print X in the No box at label S.
For more information, see the International dealings schedule instructions 2023.
If you answered Yes and the trust had foreign source business income and is a small business entity, see Small business income tax offset.
Listed country
Print at label M Listed country the amount of gross attributed foreign income from controlled foreign entities and transferor trusts of listed countries. Listed countries are set out in Regulation 19 of the Income Tax Assessment (1936 Act) Regulation 2015 (ITA (1936)R).
Attributed foreign income is the income attributed to the taxpayer from controlled foreign entities, calculated in accordance with Division 7 of Part X of the ITAA 1936, and includes an amount grossed-up under section 392 of the ITAA 1936, as appropriate, to the extent of any foreign taxes paid.
Print at label M the amount of income attributed from a transferor trust that is a listed country trust estate, calculated in accordance with Subdivision D of Division 6AAA of the ITAA 1936.
A listed country trust estate is defined in section 102AAE of the ITAA 1936.
Unlisted country
Print at label X Unlisted country the amount of attributed foreign income from controlled foreign entities in unlisted countries. Unlisted countries are countries that are not listed in Regulation 19 of the ITA (1936)R.
Print at label X the amount of income attributed from a transferor trust if the amount has not been included at label M.
Small business income tax offset
If the trust is a small business entity and has attributed net business income, any individual beneficiaries may be entitled to the small business income tax offset.
See the instructions for item 5 Business income and expenses and complete Worksheet 1A.
The individual beneficiaries will need to know their share of net small business income from the trust to work out their entitlement to the small business income tax offset.
23 Other assessable foreign source income
Complete a losses schedule if the trust:
- has an interest in a controlled foreign company (CFC) that has current year losses greater than $100,000
- has an interest in a CFC that has deducted or carried forward a loss to later income years greater than $100,000.
If the trust received assessable dividends directly or indirectly from a New Zealand franking company, the dividends (including any supplementary dividends) must be declared as assessable foreign income even if dividend withholding tax was deducted in New Zealand.
The individual beneficiaries of the trust may be able to claim a foreign income tax offset for any New Zealand dividend withholding tax paid on the dividend. See Foreign income return form guide to work out whether the dividend is assessable income.
If the dividend from a New Zealand franking company is assessable income, then the amount of the Australian franking credit attached to the dividend is also assessable income. Subject to satisfying certain qualifying criteria, the beneficiaries or trustee may be entitled to a share of the benefit of Australian franking credit attached to the franked dividend. For more information, see Appendix 1.
The dividend may include an amount of New Zealand imputation credits. Australian residents cannot claim any amounts of New Zealand imputation credits.
Gross foreign source income
Print at label B Other assessable foreign source income: Gross the gross amount of assessable income derived from foreign sources, including amounts distributed from partnerships and other trusts as well as New Zealand franking company dividends and supplementary dividends. Include any foreign tax withheld and/or paid at source on that income.
Do not include at label B:
- any income which is exempt from tax in Australia or treated as non-assessable non-exempt income under sections 23AI and 23AK of the ITAA 1936
- any amount of New Zealand imputation credits
- any amount of Australian franking credits attached to dividends from a New Zealand franking company; show these at label D Australian franking credits from a New Zealand franking company
- income already included at item 22 Attributed foreign income
- any foreign source capital gains or capital losses.
Include foreign source capital gains or capital losses when calculating the amount at item 21 Capital gains.
In referring to foreign source capital gains, an Australian resident trust makes a capital gain if a CGT event happens to any of their overseas CGT assets.
Broadly, a trust that is not an Australian resident makes a capital gain only if the CGT asset is taxable Australian property just before the CGT event happens.
If the TOFA rules apply to the trust, include 'gross foreign source income' from financial arrangements subject to the TOFA rules at label B.
Net foreign source income
Print at label V Other assessable foreign source income: Net the net income derived from foreign sources.
The amount at label V is the gross amount recorded at label B, less any deductions allowable to the trust incurred in deriving that income. Debt deductions (such as interest and borrowing costs) that relate to assessable foreign source income and that are not attributable to an overseas permanent establishment of the taxpayer are not applied against assessable foreign source income for the purpose of calculating net foreign income or identifying a foreign loss. Do not claim these amounts here. Include them at item 18 Other deductions.
If the amount at label V is negative, print L in the box at the right of the amount.
The trust combines both foreign and domestic deductions. Where the combined deductions exceed net exempt income and assessable income, the excess is a tax loss. This tax loss can be carried forward and applied in a future income year, against, firstly, net exempt income; and, secondly, the excess of assessable income over deductions (except tax losses).
Under the trust loss provisions of Schedule 2F to the ITAA 1936, certain rules have to be satisfied by a trust before it can use prior year unrecouped foreign losses. For more information, see Losses.
If the amount you include at label V includes foreign source business income, see Small business income tax offset.
Foreign income tax offsets
Print at label Z Foreign income tax offset the amount of any foreign income tax paid by the trust on foreign source income it derives.
If foreign income tax has actually been paid by the trust, then the beneficiaries may be able to claim a foreign income tax offset in their individual tax returns.
Example 9: foreign income tax paid by trustee
The S trust estate derives rental income from commercial property investments in a foreign country, on which the trustee pays foreign income tax. Samantha, an Australian resident, is the sole beneficiary of the S trust estate and is presently entitled to all of its income. As such, she is assessed on the whole of the trust’s net income. Although Samantha hasn’t directly paid the foreign income tax, she is deemed to have paid it.
End of exampleAustralian franking credits from a New Zealand franking company
Print at label D Australian franking credits from a New Zealand franking company the amount of Australian franking credits that are included in the net income of the trust because of franked dividends received from a New Zealand franking company directly or indirectly through a partnership or other trust.
The amount included at label D is not necessarily the total amount that the trustee or beneficiaries can claim; see Appendix 1.
Small business income tax offset
If any part of the amount at label V Net is net business income from a small business entity, any individual beneficiaries may be entitled to the small business income tax offset.
See the instructions for item 5 Business income and expenses and complete Worksheet 1A.
The individual beneficiaries will need to know their share of net small business income from the trust to work out their entitlement to the small business income tax offset.
24 Total of items 20 to 23
Print at item 24 Total of items 20 to 23 the total of the amounts shown at items 20 to 23.
If this amount is a net loss, print L in the box at the right of the amount. Do not include prior year losses here.
If the amount shown at item 24 is a net income amount and the trust is able to deduct the whole or part of prior year losses in 2022–23 under section 36-15 of the ITAA 1997, print the amount of prior year losses to be deducted at item 25 Tax losses deducted.
Continue to: Tax losses deducted – item 25
Return to: Instructions to complete the Trust tax return 2023