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Mala14(Superuser)Superuser
24 Aug 2021

Hi

This Client has a few years of outstanding for the Family Trust. Obviously, they haven't done minutes before each financial year-end. I understand that if no minutes are done before year-end, the trustee will be assessed on the trust's net (taxable) income.

The trustee is a company- in this case, do we have to lodge a tax return for each year for the company as well?

Can we just do it like a normal company tax return or anything else to consider? (Not sure whether it has a TFN)

What do we do for the minutes for the previous years?

Thanks

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4,444 views
16 replies

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Bruce4Tax(Taxicorn)Taxicorn
25 Aug 2021

What if the beneficiary is a company (Corporate beneficiary)?

Can you please give some advice on this? I read few articles about this, noticed Div 7A /dividend issues. (trust deed should have some instructions regarding the distribution)

If a company is in the deed as a default beneficiary, then you can show the distribution as taking place.

If not, then there is no beneficiary presently entitled - trust pays tax at top tax rate.

With your experience, what is the best way to handle it when it Corporate beneficiary? any concern?

If company is presently entitled in year 1, then:

1. company pays tax in year 1

2. trust has 12 months to pay distrbn to company - unpaid present entitlement (UPE)

3. if distribution not paid within 12 months, then simplest way is to treat UPE as a Div 7A loan at the end of year 2

(assuming there is a Div 7A loan agreement in place e.g. in company constitution - if not you may be able to get ATO discretion?

I have never tried that, but I keep a tight reign on my companies by getting Div 7A loans in place at the start.)

4. in year 3, trust must pay min Div 7A loan payment, or that amount will be a deemed dividend.

If you are in a discussion group, you could sub this out to someone more familiar with trusts, Div 7A, etc - that is what happens in the discussion group I am in.

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Bruce4Tax(Taxicorn)Taxicorn
25 Aug 2021

This Client has a few years of outstanding for the Family Trust. Obviously, they havent done minutes before each financial year-end.

Not obvious to me - need to talk to the client . Maybe they made indormal notes to distribute in the same % split as the previous year.

I understand that if no minutes are done before year-end, the trustee will be assessed on the trust's net (taxable) income.

Yes - at 47% - unless the trust deed provides for a default beneficiary

https://www.tved.net.au/index.cfm?SimpleDisplay=PaperDisplay.cfm&PaperDisplay=https://www.tved.net.au/PublicPapers/December_2005,_Sound_Education_in_Taxation,_Trust_Distribution_Screw_Ups_and_How_to_Avoid_Them.html

The trustee is a company- in this case, do we have to lodge a tax return for each year for the company as well?

No - trust tax return showing no beneficiary presently entitled.

Trustee receives assessment notice on behalf of the trust.

Can we just do it like a normal company tax return or anything else to consider? (Not sure whether it has a TFN)

No - see above.

Trustee company should have a TFN, but is not required to lodge if that is all it does.

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Mala14(Superuser)Superuser
25 Aug 2021

Thank you very much.

This Client has a few years of outstanding for the Family Trust. Obviously, they havent done minutes before each financial year-end.

Not obvious to me - need to talk to the client. Maybe they made informal notes to distribute in the same % split as the previous year.

This is a new trust, 3 years outstanding, so no previous resolutions and the client didn't know about this. - any advice?

Thanks

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