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  • Trust distributions

    Distributions from trusts (including managed funds) that are relevant for CGT purposes include:

    • distributions of all or a part of the trust's income where the trust’s net income for tax purposes includes a net capital gain
    • distributions or other entitlements described as being referable to a specific capital gain or gains
    • distributions of non-assessable amounts.

    You're treated as having made a capital gain if you're specifically entitled to all or part of a trust's capital gain and the gain is reflected in the trust's net income for tax purposes.

    If there is an amount of a capital gain reflected in the net income of a trust to which no entity is specifically entitled, the amount is proportionately assessed to beneficiaries in accordance with their adjusted Division 6 percentage. This is the percentage of the income of the trust estate (disregarding any amount of a capital gain or a franked distribution to which any beneficiary or the trustee is specifically entitled) to which they're presently entitled (see Determining a beneficiary's share of a trust's capital gain).

    In certain circumstances where you would be treated as having made a capital gain but are unable to benefit from it, the trustee may choose to be assessed on the capital gain on your behalf. The trustee can choose to be assessed on a capital gain provided no beneficiary has received or benefited from any amount relating to the gain during the income year or within two months of the end of the income year.

    Trustees of managed investment trusts (MITs) have had a choice to apply the rules described above for the 2010–11 and later years. That choice will continue to be available for 2015–16 and 2016–17, but will not be available to MITs after 2016–17.

    If you receive a distribution from a MIT that has not applied these rules, you will be treated as having made a capital gain if the trust’s net income for tax purposes includes a net capital gain. You must include as assessable income your share of the MIT’s net income for tax purposes at L Share of net income from trusts item 13 Partnerships and trusts on your tax return (supplementary section).

    See also:

    Streaming of capital gains

    A trust's capital gains and franked distributions can, if not prevented by the trust deed, be streamed to beneficiaries for tax purposes by making them specifically entitled to the amounts.

    If you are a beneficiary in a trust that is subject to the trust provisions relating to 'streaming' of capital gains and franked distributions, even if you are distributed an amount that is described as the CGT concession amount, you may be taken to have made a capital gain. You will need to include this in your own net capital gain calculation.

    See also:

    Non-assessable payments from a trust

    If you receive non-assessable payments from a trust, you need to make cost base adjustments to your units or trust interest. Those adjustments will affect the amount of any capital gain or loss you make on the unit or interest (for example, when you sell it). If non-assessable payments exceed your cost base, you may also make a capital gain equal to that excess in the year it is paid to you.

    Note that the non-assessable payments may be over a number of years and once the cost base is reduced to zero the excess is a capital gain in the year the excess arises.

    Non-assessable payments to beneficiaries of a discretionary trust don't give rise to capital gains.

    You can't make a capital loss from a non-assessable payment.

    See also:

    Last modified: 17 Jul 2017QC 52237