We have previously reported (Trust Streaming and Tax File Number
Notifications - see below for this information)) that beneficiaries Tax
File Numbers need to be quoted to a trustee to prevent 46.5% withholding
tax on distributions. When the beneficiary provides the Tax File
Number for the first time, the trustee is required to report to the
Australian Taxation Office by the last day of the month following the
end of the quarter. In other words, if a beneficiary advises the Tax
File Number during June 2012, then the report must be sent to the
Australian Taxation Office by 31st July 2012. Tax agents are not
always aware of the date of birth of potential beneficiaries (i.e.
children) and will often need assistance in being reminded and then
reporting on the trustees behalf. If you expect to make
distributions to children over the age 18 for the first time this year,
it is most important that you help your tax agent satisfy the
eligibility and reporting requirements immediately.
Trust Streaming and Tax File Number (TFN) Notification Following
a High Court decision last year – known as the Bamford decision –
legislation has been formally enacted to provide certainty to trusts in
relation to the streaming of capital gains and franked distributions
(including any attached franking credits) to specific beneficiaries.
The
taxation of trust has been quite vague, since family trusts became
popular over 30 years ago. Treasury has a great deal of work to resolve
the many remaining complexities, with this interim measure solving just
one of the problems.
Trustees may need to notify the ATO of
beneficiaries TFN’s well before lodgement of income tax returns.
Uncertainty remains. Is this notification within 28 days, or of a
distribution of a payment or are they same?
The ATO want TFN’s
for beneficiaries receiving distributions last year (i.e. before 30 June
2011) by 31 August 2011, unless they were notified when lodging 2010
income tax return or are under the age of 18 years.
You can
assist your tax agent by ensuring that any children likely to turn 19 in
the near future have a TFN. It is a cumbersome process, so we suggest
that you start with an appointment at a Post Office many months before
the child turns 19 years of age.
As the legislation for franking
credits and capital gains flowing through trusts was finalised so close
to the end of the income year, the Australian Taxation Office (ATO) has
decided to extend the time allowed for trustees to record a
beneficiary’s entitlement to a franked distribution for the purpose of
the new legislation for the 2010–11 income year only.
The extension ends on 31 August 2011.
10th-August-2012 | 