Part B: the beneficiary
Where the test trust is not excluded from the set of rules by Part A, you need to determine for each beneficiary if the test trust is affected by:
Step 4 - TB reporting rules
Step 5 - TFN withholding rules
Step 4 - determine whether there is a trustee beneficiary
Where trustee beneficiary reporting rules apply see:
Trustee beneficiary reporting rules
Step 5 - determine whether for each beneficiary the test trust is subject to the TFN withholding rules
The TFN withholding rules apply for resident beneficiaries only.
The TFN withholding rules do not apply if the resident beneficiary is:
- A trustee beneficiary where the test trust is required to make a correct TB statement
- An exempt entity (for example, tax concession charities, deductible gift recipients and other entities that self-assess their status as tax-exempt)
- A beneficiary that you are liable to pay tax for under section 98 of the ITAA 1936 for example certain beneficiaries under a legal disability, or
- A beneficiary for which family trust distribution tax is payable on the distribution (this is where the beneficiary in receipt of the distribution is outside the family group).
You must apply the rules if your beneficiary does not belong to one of the excluded categories in Step 5.
Work out if the trustee beneficiary reporting rules, the tax file number withholding rules, or both, apply to you as trustee of a closely held trust.