Author: KylieATO(Community Support)Community Support 22 Mar 2024
Hi @Angelo123,
Thankyou so much for your patience. This one is pretty complicated with lots of different things to cover, so its a very long answer. We have also included all the links so you can check out all the information mentioned.
Q1. As the trustee pays the tax due for the individuals, how can we claim any tax credit on the side of the individuals?
The way to claim a credit is set out below. However, for dividends and interest distributed to non-residents these will be subject to a ‘final’ withholding tax paid by the trustee and no credit will be available to the non-resident beneficiary.
Special rules for specific types of income
There are special rules for particular amounts included in net income:
Dividends, interest, and royalties
Income taxed under the withholding tax rules, or specifically excluded from those rules (for example, franked dividends), is not taxed again to the trustee under section 98 or to a beneficiary.
A beneficiary is liable, under the withholding rules in Division 11A of Part III of the ITAA 1936, for tax on Australian dividends, interest and royalties to which they are presently entitled while a non-resident. The withholding tax is collected from the trustee under the pay as you go withholding rules in the Taxation Administration Act 1953.
If a non-resident beneficiary is taken by Division 11A of Part III to be presently entitled to a franked distribution received by a trust, the franking credits attached to that distribution are not taxed to the trustee, do not reduce the tax payable of either the trustee or beneficiary, and are not refundable.
(From) Tax on trust distributions to non-resident beneficiaries | Australian Taxation Office (ato.gov.au)
However, if you have other kinds of income outside of these categories then the following applies:
See Tax on trust distributions to non-resident beneficiaries | Australian Taxation Office (ato.gov.au)
“Tax assessed to a trustee in relation to a non-resident beneficiary is generally not a final tax. When the non-resident beneficiary prepares their Australian tax return, they can claim a credit for the tax paid by the trustee (under subsection 98A(2)).”
To claim the credit on your tax return see the following instructions where it explains how to account for a tax credit from a trust::
See 13 Partnerships and trusts 2023 | Australian Taxation Office (ato.gov.au) – Check out the information under the heading Were you a foreign resident?
Q.2 The capital gains are investments on a listed shares. as the non-resident is not allowed for discount, how do we present this on the trust return? or do we present this at all? (considering the investment is less than 10% of the total shares).
The Trustee declares the capital gain as per instructions above and the non-resident beneficiary declares a capital gain at question 18 Capital gains 2023 | Australian Taxation Office (ato.gov.au) .
“7. The trustee is assessed under section 98 of the ITAA 1936 on the $100,000 of trust capital gains attributable to Edward. …section 115-220 increases the amount assessable to the trustee under section 98 of the ITAA 1936 without regard to those conditions.
8. Capital gains totalling $100,000 are included in the calculation of Edward's net capital gain for the income year.[5] However, Edward is entitled to a refundable tax offset for the tax the trustee paid on his behalf under subsection 98A(2) of the ITAA 1936.”
See TD 2022/12 | Legal database (ato.gov.au) that explains how the $100,000 referred to in the example above is a ‘non-discounted capital gain’.
Despite the fact that the listed shares, if they were just sold by a non-resident, would not be assessable capital gains, the fact that the capital gains are distributed through a resident non-fixed trust to a non-resident beneficiary means that the trust pays tax on the capital gain: TD 2022/13 | Legal database (ato.gov.au).
8,870 views
7 replies