Reporting obligations for a closely held trust
Under S.102UK and S.102UT, a trustee of a closely held trust that has made a distribution (whether of income or capital) to a trustee beneficiary is generally required to lodge a report to the ATO (known as a ‘correct TB statement’) when the distribution contains either of the following:
- An untaxed amount – The ‘untaxed amount’ is effectively a trustee beneficiary’s share of net (taxable) income of a closely held trust, to the extent this has not previously been taxed to another entity. Refer to S.102UE.
- A tax-preferred amount – The ‘tax-preferred amount’ broadly refers to income of a closely held trust for trust law purposes that is not included in its net (taxable) income, as well as capital of the trust. Refer to S.102UI. Examples of tax-preferred amounts include:
- non-assessable non-exempt income of the closely held trust;
- exempt income of the closely held trust;
- the excess of trust income over net (taxable) income due to timing and permanent differences;
- non-assessable capital gains (e.g., the discount component of discount capital gains); and
- returns of trust capital to unit holders or beneficiaries.
A correct TB statement reports the untaxed and tax-preferred amounts included in a distribution to which a trustee beneficiary is entitled. It also includes details of the beneficiary’s name and tax file number (if they are a resident at the end of the year of income) or their name and address (if they are a non-resident at this time). Refer to S.102UG (3).
A correct TB statement is completed (and lodged) by the trustee of the closely held trust as part of the trust tax return (i.e., it is included in the trustee beneficiary’s ‘Statement of distribution’). This must be lodged by the due date of the return, unless the ATO has allowed a further period for lodgment. Refer to S.102UH, S.102UK(1)(d) and S.102UT (1).
TAX WARNING – Closely held trust with multiple trustee beneficiaries
A closely held trust that has made distributions (containing an untaxed or tax-preferred amount) to more than one trustee beneficiary is generally required to lodge a correct TB statement in respect of each beneficiary.