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  • Part A: The trust

    Follow these steps to work out whether you, as trustee of the test trust, are subject to the rules:

    Step 1 – Determine residency status of trust

    The rules that apply to you depend on the residency status of the test trust.

    If the test trust is a resident trust:

    • TB reporting rules apply
    • TFN withholding rules apply.

    If the test trust is a non-resident trust:

    • TB reporting rules apply
    • TFN withholding rules do not apply.

    Step 2 – Determine whether the test trust is a closely held trust

    A trust will be a closely held trust when it either:

    • satisfies the '20/75 test' (see note), or
    • is a discretionary trust (one that is not a fixed trust).

    Note: A trust satisfies the 20/75 test where up to 20 individuals have between them, directly or indirectly, fixed entitlements to a 75% or greater share of the income or capital of the trust.

    Special rules treat the trustees of some discretionary trusts as individuals. An individual and all of his or her relatives are taken to be one individual for the purposes of the test.

    If the test trust does not meet either of the requirements, it is not a closely held trust and you do not need to continue.

    Step 3 – Determine if an exclusion applies

    Use the following table to determine if the test trust is excluded from the definition of a closely held trust for each set of rules.

    Exclusions from TB reporting rules and TFN withholding rules

    Type of test trust

    TB reporting
    rules apply

    TFN withholding
    rules apply

    Complying super fund

    Excluded

    Excluded

    Complying approved deposit fund

    Excluded

    Excluded

    Pooled superannuation trust

    Excluded

    Excluded

    Deceased estate – before the end of the income year in which the fifth anniversary of the individual's death occurred

    Excluded

    Excluded

    Deceased estate – after the year of income in which the fifth anniversary of the individual's death occurred

    Not excluded

    Not excluded

    Fixed unit trust – where all of the income and capital is subject to fixed entitlements, held directly or indirectly, for the benefit of entities whose income is exempt from income tax

    Excluded

    Excluded

    Fixed unit trust – where only some of the income and capital is held for the benefit of entities whose income is exempt from income tax

    Not excluded

    Not excluded

    Unit trust – where the units are listed on the stock market operated by ASX Limited

    Excluded

    Excluded

    Family trust (that is, one with a valid family trust election in force)

    Excluded, but not excluded from trustee beneficiary non-disclosure tax for circular trust distributions

    Not excluded

    A trust that is subject to a valid interposed entity election

    Excluded, but not excluded from trustee beneficiary non-disclosure tax for circular trust distributions

    Not excluded

    A trust that forms part of a 'family group'

    Excluded, but not excluded from trustee beneficiary non-disclosure tax for circular trust distributions

    Not excluded

    A discretionary mutual fund

    Not excluded

    Excluded

    An employee share trust for an employee share scheme

    Not excluded

    Excluded

    A law practice trust

    Not excluded

    Excluded

    If the test trust is excluded for both sets of rules, you do not need to continue.

    If it is not excluded from one or both sets of rules, you need to complete Part B to determine whether for each beneficiary the test trust is affected by the rules.

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      Last modified: 20 Nov 2019QC 21158