The implications of a correct TB statement not being lodged in respect of a trust distribution vary depending on the components of the distribution (i.e., whether it contains an untaxed and/or a tax- preferred amount).
To the extent a distribution contains an untaxed amount, a trustee of a closely held trust is generally liable for ‘trustee beneficiary non-disclosure tax’ (‘TBNT’) at a rate of 47% (for the 2020 income year) on the amount. Refer to S.102UK(2)(a) and S.4 of the Taxation (Trustee Beneficiary Non-Disclosure Tax) Act (No. 1) 2007. Any amount to which TBNT applies is not assessable income of the trustee beneficiary. Refer to S.102UK(2)(b).
A trustee of a closely held trust that is liable for TBNT should complete a ‘Trustee beneficiary non- disclosure tax payment advice’ form (NAT 72967), which advises the ATO of the amount of TBNT payable and allows the trustee to make payment. TBNT is payable within 21 days of the due date of lodgement of the trust tax return, although the ATO may, in special circumstances, allow payment to be made at a later date. Refer to S.102UO (1).
It should be noted that, where a trustee of a closely held trust is a company, each director of the company is jointly and severally liable (together with the corporate trustee) for the TBNT amount. There are exceptions to this general rule, including where a director, by reason of illness, is not involved in a decision to not lodge a correct TB statement. Refer to S.102UK(2)(a) and (3), and S.102UL.
Importantly, a trustee of a closely held trust is not liable for TBNT where they fail to report a tax- preferred amount in a correct TB statement. Rather, this will (subject to certain exceptions) constitute an offence under S.8C of the Taxation Administration Act 1953 and penalties may be imposed. Refer to S.102UT (2), (3) and (4).