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Taxbug007(Dynamo)Registered Tax Professional
4 Sept 2023

Hi ATO and Experts,


I have a client which is a fixed unit trust (MIT) but not an AMIT. No Div7A issue and no related entities.


At the end of the financial year, trustee had some cash flow issues and fund chose not to distribute all the cash amounts. Let's say, taxable income - interest income is $100 and cash distribution is $40. $60 UPE.


I have two questions:

  1. Undistributed income was booked as payable in balance sheet, and we would distribute $100 to unit holders as taxable income. Therefore, there is no undistributed income with highest marginal rate. The UPE of $60 will be payable in next 12 months. Is there any ATO ruling/law to limit this period ? Can we hold for longer? (Trust Deed - no indication).


2.How do we prepare the tax statement for above situation (as per ATO - SDS)?

Option1, add line as payable in the tax statement,

or Option 2 add a paragraph to disclose some amounts are payable within 12 month or longer (if possible).


Much appreciated for your comments on this as always.






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Most helpful reply

AriATO(Community Support)Community Support
12 Sept 2023

Hi Taxbug007

 

Managed investment trusts (and their members) are generally taxed under the ordinary trust provisions. Under these provisions, generally the beneficiary or the trustee (on the beneficiary’s behalf) is taxed on their share of the net income of a trust based on the 'present entitlement' of beneficiaries to trust income.

 

This means you will need to disclose the full income as income to which beneficiaries are presently entitled on the distribution statement, regardless of whether they have been paid any of the amount.

Please see the Statement of distribution instructions for further information.

 

You may also wish to seek tailored technical assistance if you require more certainty about your situation. 

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Most helpful reply

AriATO(Community Support)Community Support
12 Sept 2023

Hi Taxbug007

 

Managed investment trusts (and their members) are generally taxed under the ordinary trust provisions. Under these provisions, generally the beneficiary or the trustee (on the beneficiary’s behalf) is taxed on their share of the net income of a trust based on the 'present entitlement' of beneficiaries to trust income.

 

This means you will need to disclose the full income as income to which beneficiaries are presently entitled on the distribution statement, regardless of whether they have been paid any of the amount.

Please see the Statement of distribution instructions for further information.

 

You may also wish to seek tailored technical assistance if you require more certainty about your situation. 

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How to prepare tax statement if Trust chose to keep distribution as UPE | ATO Community