Capital gains made by trusts
If you receive a distribution from a trust, you may have capital gains tax (CGT) consequences.
Trusts include managed funds, such as property trusts, share trusts, equity trusts, growth trusts, imputation trusts and balanced trusts.
Distributions from trusts can include different amounts, but only the following types of amounts are relevant for CGT purposes:
- distributions of the trust's net income for tax purposes that 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.
If permitted by the trust deed, from 1 July 2010 capital gains can be streamed to beneficiaries for tax purposes by making them specifically entitled to the capital gains.
If you are assessable in relation to part or all of trust's capital gain, you can apply your own current and earlier year capital losses against that capital gain and then apply the discount percentage and the small business 50% active asset reduction (if available).
The trustee should advise you whether the CGT discount, the small business 50% active asset reduction, or both, have been taken into account in working out the amount of the trust net capital gain.
If your distribution from a trust includes an amount described as tax-free, CGT concession amount, tax-exempted amount or tax deferred amount, special rules may apply to these non-assessable payments. While you may not need to include a non-assessable payment from a trust as trust income, it may:
- be relevant in determining the amount of any net capital gain you must declare
- affect the cost base and reduced cost base of your units or trust interest.
Trustee can choose to be assessed on capital gains
The trustee of a resident trust, if permitted by the trust deed, can choose to be assessed on a capital gain of the trust. This allows trustee of a resident trust to choose to pay tax on a capital gain of the trust if no trust property representing all or part of that capital gain has been paid to or applied for the benefit of a beneficiary of the trust by the end of 2 months after the end of the income year. Only the trustee can make this choice.
This option is available for the 2010-11 income year onwards.
Find out about:
If you are entitled to a share in a capital gain made by a trust, you need to know how to declare the amounts on your income tax return. The term 'trust' includes managed funds such as property and share trusts.
- Guide to capital gains tax will help you work out whether any of the assets you own or may own in the future, and any events that happen, are subject to CGT.
- For assistance on declaring trust income and completing an individual tax return, phone 13 28 61.
- For all other trust-related enquiries, including completing a trust return, income averaging and thin capitalisation, phone 13 28 66.