Hello,
I have a question as to what figure to put at the label 56 - Income of the trust estate.
I have always put the taxable amount distributed to the beneficiaries at this label.
I have since been told, that I should be putting the net income of the trust estate, before any tax adjustments at this label.
For example:
Trust was a small business entity back in 2000 and has been reporting their taxable income on a cash basis for many years as it is the most appropriate reporting method. In the financial statements, we have included the debtors and creditors and performed a tax reconciliation to bring the accounts back to cash reporting for tax.
In the 2022 year, the financial statements showed a small profit as it was suffering from the effects of COVID 19, however the taxable income was higher as they collected the debtors owing from previous years. Lets say the figures are:
Financials $10,000
Taxable $50,000
It was always my understanding that the $50,000 would be included at item 56, however I have been told that I should be showing the $10,000.
The trust deed states that the income is based on what is contained in section 95 of the ITAA however the trustee can resolve to determine the net income based upon some other methodology as set out in the deed.
What should I be putting?
Would the answer be any different if say the financial statements showed a loss, however there was still a taxable income?
I hope that makes sense.
Thank you.
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