Income excluding foreign income – items 10 to 15

Instructions to complete items 10 to 15 in the tax return relating to income of the trust, excluding foreign income.

10 Forestry managed investment scheme income

Item 10 deals with the following:

• Definitions
• For an initial participant in an FMIS
• For a subsequent participant in an FMIS
• To complete this item

Print at label Q Forestry managed investment scheme income the total income from the forestry interests that the trust holds in a forestry managed investment scheme (FMIS). The amount you show at label Q will depend on the points below.

Do not include capital gains from an FMIS; show these at item 21 Capital gain – label A Net capital gain. For more information on the CGT treatment of the trust’s forestry interests, see Guide to capital gains tax 2023.

For information on calculating your income and deductions if the trust is a member of a collapsed agribusiness managed investment scheme, see Collapse and restructure of agribusiness managed investment schemes – participant information.

Definitions

A forestry interest in an FMIS is a right to benefits produced by the FMIS, whether the right is actual, prospective or contingent, and whether it is enforceable or not.

The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.

A trust is an initial participant in a FMIS if:

• it obtained its forestry interest in the FMIS from the forestry manager of the scheme, and
• its payment to obtain the forestry interest in an FMIS results in the establishment of trees.

A trust is a subsequent participant in an FMIS if it acquired its interest through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant in the scheme.

The amount of the trust’s total forestry scheme deductions is the total of all the amounts it can deduct or has deducted for each income year it held its forestry interest. For more information on amounts the trust can deduct, see item 17 Forestry managed investment scheme deduction.

The amount of the trust’s incidental forestry scheme receipts is the total of all the amounts it has received from the FMIS in each income year it held its forestry interest, other than amounts received because of a CGT event.

For an initial participant in an FMIS

Thinning receipts

If the trust received thinning proceeds from its forestry interest, include the actual amount received at label Q.

Sale and harvest receipts – forestry interest no longer held

Include the market value of the forestry interest at the time of the CGT event at label Q if the trust:

• ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• has claimed a deduction, or can claim a deduction, or would be entitled to deduct such amounts but for a CGT event happening within 4 years after the end of the income year in which the trust first pays an amount under the FMIS.

Sale and harvest receipts – forestry interest still held

Include at label Q the amount by which the market value of the forestry interest was reduced as a result of the CGT event if:

• a CGT event happened and the trust still held its forestry interest (because it sold part of its interest or there was a partial harvest), and
• the trust has claimed a deduction, or can claim a deduction, or would be entitled to deduct such amounts but for a CGT event happening within 4 years after the end of the income year in which the trust first pays an amount under the FMIS.

For a subsequent participant in an FMIS

Thinning receipts

If the trust received thinning proceeds from its forestry interest then include the actual amount received at label Q.

Sale and harvest receipts – forestry interest no longer held

If the trust:

• ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• has deducted, or can deduct, or could have deducted, an amount if the trust had paid the amount under the scheme in relation to the forestry interest,

then include at label Q the lesser of

• the market value of the forestry interest at the time of the CGT event, or
• the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.

Example 6 shows how to calculate the amount to include at label Q where the trust sold its forestry interest.

Sale and harvest receipts – forestry interest still held

If:

• a CGT event happened and the trust still held its forestry interest (because it sold part of its interest or there was a partial harvest), and
• the trust has deducted, or could have deducted, an amount if the trust had paid the amount under the FMIS in relation to the forestry interest,

work out:

• the market value of the forestry interest at the time of the CGT event
• the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts ('net deductions').

Use the lesser of the 2 amounts above in the following formula:

Lesser of 2 amounts above × (the decrease (if any) in the market value of the forestry interest (as a result of the CGT event) ÷ the market value of the forestry interest just before the CGT event)

Include at label Q the amount calculated using the formula.

In a future income year (a year in which the trust receives further proceeds from a harvest or the sale of its forestry interest), disregard the amount of the 'net deductions' that has already been reflected at label Q.

Example 7 shows how to calculate the amount to include at label Q where there is a harvest payment made and the trust still holds the forestry interest.

To complete this item

Add up all the amounts you worked out for the trust’s FMIS income. Print the total at label Q.

See examples 6 and 7 for how to calculate the amount you show at label Q where the trust is a subsequent participant that holds the forestry interest on capital account.

For more information on the CGT treatment of a trust’s forestry interest acquired as a subsequent participant, see Guide to capital gains tax 2023.

 

11 Gross interest

Item 11 deals with the following:

• Discounted, deferred interest or capital-indexed securities
• TFN amounts withheld from gross interest

Print at label J Gross interest the interest from banks and credit unions, building societies, debentures, notes and deposits, income accrued on discounted or deferred interest securities, government securities and interest paid by us.

The total, which is the gross amount of interest received or credited, must be included in assessable income.

If the TOFA rules apply to the trust, include all interest received or credited at label J. This includes interest from financial arrangements subject to the TOFA rules.

If the trust has received or is entitled to receive an amount described as interest from a cash management trust or other similar trust investment product include this at item 8 Partnerships and trusts.

Copy details from all statements to Worksheet 3. Keep the worksheet with your tax records.

Do not include non-share dividends received from holding a non-share equity interest. If the trust holds such an interest, the issuer is obliged to forward a dividend statement with details of the dividends, which should be recorded at item 12 Dividends.

For more information on non-share dividends and non-share equity interests, see Debt and equity tests.

Discounted, deferred interest or capital-indexed securities

Print at label J the appropriate amount of discount, interest or other gain which accrued this income year on a discounted, deferred interest or capital-indexed security.

Qualifying security rules

A discounted, deferred interest or capital-indexed security may be subject to the qualifying security rules in Division 16E of the ITAA 1936.

Those rules will only apply if the TOFA rules do not apply (see below). In addition, the security must be one that:

• was issued after 16 December 1984
• had a maturity date more than 12 months from the issue date
• the sum of all payments under the security (except periodic interest, for example, a coupon rate) exceeds its issue price by greater than 1.5%.

TFN amounts withheld from gross interest

Print at label I TFN amounts withheld from gross interest any TFN amounts withheld from gross interest where a TFN has not been provided to the investment body.

Record keeping

Keep all documents issued by the investment body that detail payments of income and any TFN amounts withheld from those payments.

Do not attach these documents to the trust tax return; keep them with the trust’s tax records.

We may check the amount shown at label J with our own records to determine accuracy, see Data matching.

12 Dividends

If the trust is a shareholder or holder of a non-share equity interest in a company (including a LIC) or it held units in a corporate unit trust or a public trading trust, that entity will usually give the trustee a dividend (also referred to as a distribution) or non-share dividend statement. The statement is likely to include:

• the name of the entity making the distribution
• the date on which the distribution was made
• the amount of the distribution
• the amount of franking credit allocated to the distribution
• the franking percentage for the distribution
• the amount of any withholding tax deducted from the distribution
• the name of the shareholder
• if the distribution is unfranked, a statement to that effect, or
• if the distribution is franked, the franked amount and the unfranked amount of the distribution.

Show only amounts received directly from Australian companies, corporate limited partnerships, corporate unit trusts and public trading trusts.

Copy details from all statements to Worksheet 4, and keep the worksheet with the trust’s tax records.

Show dividends that are part of a distribution from a managed investment fund or other trust or partnership at item 8 Partnerships and trusts. Show dividends received from foreign sources, including dividends from a New Zealand franking company with Australian franking credits attached, at item 23 Other assessable foreign source income.

If the trust was paid a dividend by a LIC and the dividend advice statement shows a LIC capital gain amount, the trust can claim a deduction of 50% of the LIC capital gain amount at item 16 Deductions.

Dividends on which family trust distribution or trustee beneficiary non-disclosure tax has been paid

To the extent that FTDT has been paid on a dividend paid or credited to the trust by a company that has made an interposed entity election, that amount is excluded from the assessable income of the trust under section 271-105 of Schedule 2F to the ITAA 1936. Do not show it at either label:

• K Unfranked amount
• L Franked amount.

You cannot claim a deduction for any losses or outgoings incurred in deriving an amount that is excluded from assessable income under section 271-105 and you cannot claim a credit or tax offset for any franking credit attached to the non-assessable non-exempt portion of the dividend.

Accordingly, do not include any amount at label M Franking credit for a franking credit attached to the whole or part of a dividend that is excluded under section 271-105. For more information on the circumstances that FTDT is payable, see Family trust distribution tax.

If TBNT has been paid on a dividend that is included in a share of net income which the trust, as a trustee beneficiary, is presently entitled to or which has been distributed to the trust, then the dividend is not included in the assessable income of the trust.

You cannot claim a deduction for any losses or outgoings incurred in deriving these amounts that are excluded from assessable income and you cannot claim a tax offset for any franking credits attributable to the dividend.

For more information on dividends, franking credits and tax offset entitlements, see Appendix 1.

Unfranked amount

Print at label K Unfranked amount the gross amount of unfranked dividends, and the unfranked amount of partially franked dividends (if the dividend statement shows this amount separately) received before any TFN amounts were withheld.

If the TOFA rules apply to the trust, include all unfranked dividends that were paid or credited to it by Australian companies in respect of financial arrangements subject to the TOFA rules at label K.

If the trust is a holder, or an associate of a holder, of a share or non-share equity interest in a private company and it received:

• directly or indirectly payments or loans forgiven by the company
• loans or debts forgiven by a trustee, where the company has an unpaid present entitlement to income of the trust, or
• payments from a trustee which are attributable to certain unrealised gains, where the company has an unpaid present entitlement to income of that trust

then the amounts of those payments (subject to distributable surplus and in the case of a trust the unpaid present entitlement), loans not repaid or debts forgiven are returned as an unfranked dividend unless they are specifically excluded under the provisions of Division 7A of Part III of the ITAA 1936, or the amount treated as a dividend is franked.

Division 7A was amended to enable certain amounts treated as dividends to be franked, for example, a private company can frank an amount treated as a dividend that arises because of a family law obligation in certain circumstances. For the purpose of these rules, a loan has an extended meaning to also include, for example, the provision of financial accommodation and transactions that are in-substance loans.

Dividends paid under a demerger are generally not assessable dividends. Do not include a dividend paid under a demerger at label K unless the head entity of the demerger group has advised that it is an assessable dividend.

Franked amount

Print at label L Franked amount the franked amount of franked dividends received before any TFN amounts were withheld.

If you have received a franked distribution with an associated statement of distribution that does not distinguish between the franked and unfranked portions of the dividend, include the total dividend amount at label L and include any attached franking credits at label M Franking credit.

Franking credit

Print at label M Franking credit the amount of franking credits received directly from a paying company.

The beneficiaries or trustee may be entitled to a share of the franking credits shown at label M. This share will be shown at item 58 Statement of distribution. The amount of franking credits to which they will be entitled will depend on their individual share of the franked distribution received by the trustee, having regard to the deed and any relevant trustee resolutions.

Do not show:

• franking credits if the trustee did not satisfy the holding period rule and the related payments rule in relation to the dividend, or if the dividend washing integrity rule applies. For more information, see Appendix 1
• franking credits received indirectly via a partnership or other trust; include your share of franking credit from these franked distributions at item 8 Partnerships and trusts – label D Share of franking credits from franked distributions.
• franking credits attached to distributions paid by a New Zealand franking company; if the trust received franked distributions from a New Zealand franking company, see item 23 Other assessable foreign source income.

We may check the amounts shown at label K, L and M with our own records to determine accuracy. For more information, see Data matching.

TFN amounts withheld from dividends

Print at label N TFN amounts withheld from dividends the total of TFN amounts withheld from dividends received, less any refund of TFN amounts withheld.

13 Superannuation lump sums and employment termination payments

Item 13 deals with the following:

• Superannuation death benefits paid to a trustee of a deceased estate
• Death benefit employment termination payments

Death benefit employment termination payments (ETPs) and superannuation lump sums paid to trustees of deceased estates are reported at this item.

To complete this question, use the following that your payer would have provided:

• PAYG payment summary – superannuation lump sum
• PAYG payment summary – employment termination payment.

Superannuation death benefits paid to a trustee of a deceased estate

Print at label V Death benefit superannuation lump sum where the beneficiary is a non-dependant the taxed element and at label W Death benefit superannuation lump sum where the beneficiary is a non-dependant the untaxed element.

If you have more than one payment summary, unless one or more is an amendment of an earlier payment summary, add the taxed elements together and print the total at label V and add the untaxed elements together and print the total at label W.

A superannuation death benefit paid to a trustee is taxed in the hands of the trustee in the same way that it would be taxed if paid directly to a beneficiary, that is, portions of the payment are subject to tax to the extent that the beneficiary is a dependant or a non-dependant of the deceased. There is no tax payable to the extent that the payment is made to a dependant or eligible non-dependant (see Definition of terms) of the deceased.

Eligible non-dependants of deceased members of the Australian Defence Force and Australian police forces (including Australian Protective Services) who have died in the line of duty are to be treated as dependants for tax purposes.

The superannuation fund should have provided you with a PAYG payment summary – superannuation lump sum which shows the components of the payment.

The tax-free component of a superannuation death benefit received by a trustee is not subject to tax, regardless of whether the beneficiary is a dependant or non-dependant.

To the extent that a non-dependant is the beneficiary of the estate, the taxable component of the payment is assessable income.

Death benefit employment termination payments

To the extent that the beneficiary of the estate is a dependant, taxable component amounts up to the ETP cap ($230,000 for 2022–23) are not subject to tax and are not shown in the return. Print at label X Death benefit employment termination payment where the beneficiary is a dependant amounts above the ETP cap as they are assessable income.

To the extent that a non-dependant is the beneficiary of the estate, the taxable component of the payment is assessable income and should be shown at Y Death benefit employment termination payment where the beneficiary is a non-dependant.

If you have more than one payment summary, unless one or more is an amendment of an earlier payment summary, add the components that are assessable income together and show them at the appropriate labels.

An ETP paid to a trustee is taxed in the hands of the trustee in the same way that it would be taxed if paid directly to a beneficiary, that is, the portions of the payment are subject to tax to the extent that the beneficiary is a dependant or a non-dependant of the deceased.

The employer should have provided you with a PAYG payment summary – employment termination payment which shows the components of the payment.

The tax-free component of an employment termination payment received by a trustee is not subject to tax, regardless of whether the beneficiary is a dependant or a non-dependant.

For more information, see Recipients of death benefit termination payments.

Definition of terms

A person is a dependant of the deceased if, at the time of death or the time the payment was made, the person was:

• the surviving spouse, including a de facto spouse
• a former spouse, including a former de facto spouse
• a child of the deceased who was under 18 years old
• a financial dependant of the deceased person just before he or she died, or
• in an interdependency relationship with the deceased.

A person who is not a dependant of the deceased may be referred to as a non-dependant.

A person is an eligible non-dependant if they are a non-dependant of a deceased member of the Australian Defence Force or of an Australian police force (including Australian Protective Services) who has died in the line of duty.

An interdependency relationship exists where there is a close personal relationship between 2 people who live together, and one or both provide for the financial, domestic and personal support of the other. An interdependency relationship can also exist where there is a close personal relationship, but the other conditions are not satisfied, because of the physical, intellectual or psychiatric disability of one of the people.

Your spouse includes another person (of any sex) who:

• you were in a relationship with that was registered under a prescribed state or territory law
• although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

Child, in relation to a person, includes:

• an adopted child, stepchild or an ex-nuptial child of the person
• a child of the person’s spouse (as defined above)
• someone who is a child of the person within the meaning of the Family Law Act 1975, for example, a child who is considered to be a child of a person under a state or territory court order giving effect to a surrogacy agreement.

14 Other Australian income

Print at label O the total amount of other Australian income.

If the amount is a loss, print L in the box at the right of the amount. The following are some examples of the amounts to be included at label O:

• Excepted net income
• Gains on the disposal of traditional securities
• Bonuses from life insurance companies and friendly societies
• Bonuses credited from friendly society income bonds
• Add backs: Listed investment company (LIC) capital gain
• Royalties
• Foreign exchange gains or losses
• TOFA amounts from financial arrangements

Excepted net income

Print at label Excepted net income and include at O the excepted net income received, excluding net capital gains that are included at item 21 Capital gains – label A Net capital gain.

Provide a statement on a separate sheet of paper:

• detailing the distribution of excepted income to each beneficiary, and
• listing each beneficiary who is considered to be an excepted person, giving supporting reasons.

Attach this statement to the tax return and print X in the Yes box at Have you attached any ‘other attachments’? at the top of page one of the tax return.

For an explanation of excepted income and excepted person, see Appendix 9.

Gains on the disposal of traditional securities

Print at label O any gains on the disposal or redemption of a traditional security which are assessable under section 26BB of ITAA 1936.

For more information on gains and losses on traditional securities, including traditional securities that are convertible notes or exchangeable notes, see You and your shares 2023.

Bonuses from life insurance companies and friendly societies

Life insurance policies are issued by life insurance companies and friendly societies.

If, during the year ended 30 June 2023, the trust received any bonuses or other amounts in the nature of bonuses on the maturity, forfeiture, partial or full surrender of a short-term life insurance policy taken out after 27 August 1982, you may need to show the amount at label O.

A trust is regarded as having received a bonus if it reinvests or otherwise deals with the bonus during the income year.

Do not include the amount shown on a bonus certificate if the trust:

• received it because of death, accident, illness or other disability suffered by the person on whose life the policy was effected
• received it under a policy held by the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust
• can show that the amount was received because of serious financial difficulties
• received a bonus certificate in respect of an amount allocated to increase the amount receivable on surrender or maturity.

If the policy has a date of commencement of risk on or before 27 August 1982, any bonuses received in 2022–23 are not assessable.

If the policy has a date of commencement of risk after 7 December 1983, include any bonus in assessable income as follows:

• if received during the first 8 years after the date of commencement of risk of the policy, the bonus is included in full
• if received in the ninth- year, two-thirds of the bonus amount is included
• if received in the 10th year, one-third of the bonus amount is included, and
• any amounts received after the 10th year are not included.

If, during the term of the policy, the amount of a premium increases by more than 25% over the previous year’s premium, the policy is taken to have started again with a commencement date at the beginning of the policy year in which the premium increased.

The beneficiary or trustee may, in their own tax return, claim a tax offset for a bonus or any other amount in the nature of a bonus included in the income if the organisation issuing the life policy is a:

• life insurance company that pays tax on the income from which the amount was paid, or
• friendly society.

The tax offset for 2022–23 is equal to 30 cents in each dollar.

Include the bonus or other amount in the nature of a bonus in the calculation of net income or loss of the trust and apportion it among the beneficiaries in the same ratio as they share in that net income or loss.

If the trust received assessable bonuses from a life insurance company or friendly society, show the total amount at label O. To ensure the tax offset is allowed, provide a statement showing the amounts from the life insurance company and friendly society life insurance policies and attach the statement to the tax return. Print X in the Yes box at Have you attached any ‘other attachments’? at the top of page one of the tax return.

Record keeping

If a bonus or other amount in the nature of a bonus is included at label O, or an amount was not included because of the circumstances under which it was received, keep a record of the following:

• type of policy
• name of the issuing organisation
• policy number
• date the policy was taken out
• bonus statement or advice
• date that each amount was received
• nature of each amount received, for example, bonus, loan or withdrawal
• circumstances under which each amount was received, for example, partial surrender of policy, serious financial difficulties, death, accident, illness or other disability
• basis of calculation of the amount included.

For more information on bonuses received from certain life insurance policies, see IT 2346 Income tax: bonuses paid on certain life assurance policies – section 26AH – interpretation and operation.

For more information on amounts switched between investment options for the same life insurance policy, see TD 94/82 Income tax: does section 26AH of the Income Tax Assessment Act 1936 apply when investment options are ‘switched’ under an eligible policy?

Bonuses credited from friendly society income bonds

Include bonuses received from friendly society income bonds at label O. The statement of distribution issued by friendly societies to income bond holders will advise the amount that should be included as income. Do not include these amounts in the calculation of the tax offset applicable to bonuses from life insurance policies.

Add backs: Listed investment company (LIC) capital gain

If the trust receives or is entitled to receive income from another trust or a distribution from a partnership which advises it has claimed a deduction for a LIC capital gain amount, the trust is required to add back as income an amount equivalent to its share of the deduction allowed to the partnership or other trust.

Royalties

For information on royalty income shown at label O, see Appendix 2.

Foreign exchange gains or losses

Print at label O assessable Australian source foreign exchange gains or deductible losses that you have not included elsewhere, such as in item 5 Business income and expenses. If the total amount at label O is a loss, print L in the box at the right of the amount.

For more information, see Foreign exchange gains and losses.

As foreign currency is a CGT asset, the capital gains tax provisions can apply to any capital gain or capital loss made on a CGT event. Any capital gain would generally be ignored or reduced to prevent double taxation if the gain was assessable under the TOFA rules or Division 775 of the ITAA 1997.

If a trust has made a foreign exchange gain or loss which is subject to CGT, show the capital gain or capital loss at item 21 Capital gains – label A Net capital gain.

TOFA amounts from financial arrangements

If the TOFA rules apply to calculate an assessable gain or deductible loss on the trust’s financial arrangements, include at this item those assessable gains relating to the financial arrangements.

TOFA amounts that have been included elsewhere should not be included here, for example amounts that have already been included at:

• item 5 Business income and expenses – label S Net income or loss from business
• item 8 Partnerships and trusts – label A Distribution from partnerships
• item 8 Partnerships and trusts – label Z Share of net income from trusts
• item 11 Gross interest – label J
• item 12 Dividends – label K Unfranked amount
• item 23 Other assessable foreign source income – label B Gross.

If the TOFA rules apply to the trust and the other Australian income shown at label O or any other income item includes an amount which is brought to account under the TOFA rules, also complete item Taxation of financial arrangements (TOFA) – item 31.

For more information, see Guide to taxation of financial arrangements (TOFA).

15 Total of items 5 to 14

Print at item 15 Total of items 5 to 14 the total of all Australian income. If this amount is a loss, print L in the box at the right of the amount.

Continue to: Deductions – items 16 to 20