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Re: Distribution of capital gain and revenue loss to another trust.

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Megastar

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Replies 1

Hi, 

A trust (Trust A) has a capital gain of say $50,000 and a revenue loss of say $20,000, now the net income of the trust is $15,000 ($50K CG -$20K loss = $30K – 50% Discount on capital gain), which it can distribute to its beneficiaries, (Trust deed treat capital gain as distributable income, hence no problem in distribution)

Now its beneficiary is another trust – Trust B, which has carried forward capital loss of $80,000 and net income (excluding distribution) of say $100,000.

Now, can trust B adjust its carried forwarded capital loss from the capital gain distributed from the Trust A and use the revenue loss distributed from Trust A  to offset its revenue income?

I know that trust cant distribute loss, but here there is net gain, so it can be distributed.

So in this case the net Capital gain of Trust B will be Nil.

Capital gain (distributed from Trust A)      $50,0000

Less: Carried forwarded loss adjusted       $50,000

 

And Net income of Trust B will be $80,000

 Net Income (Excluding distribution)             $100,000

Less: Revenue loss distributed from trust        $20,000

 

Is it correct?

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ATO Certified

Anonymous

Replies 0

You need to be very careful with this .. this arrangement could be in breach of the Trust Loss provisions ...  as those provisions also cover distributions / income injections to a Trust with a loss ... " the income injection test "

 

https://www.ato.gov.au/General/Trusts/In-detail/Losses/Trust-loss-provisions/

 

I suggest that if the trustee is seriously considering this then they get something in writing from the ATO to cover themselves before they proceed via a ....   private ruling.

  

or contact the ATO on 13 28 66

 

Also, this forum is not designed to answer questions with any where near this degree of technical difficulty, and in most instances you would only get a general response directing you to other ATO avenues  of service.

 

1 REPLY 1

Best answer

ATO Certified

Anonymous

Replies 0

You need to be very careful with this .. this arrangement could be in breach of the Trust Loss provisions ...  as those provisions also cover distributions / income injections to a Trust with a loss ... " the income injection test "

 

https://www.ato.gov.au/General/Trusts/In-detail/Losses/Trust-loss-provisions/

 

I suggest that if the trustee is seriously considering this then they get something in writing from the ATO to cover themselves before they proceed via a ....   private ruling.

  

or contact the ATO on 13 28 66

 

Also, this forum is not designed to answer questions with any where near this degree of technical difficulty, and in most instances you would only get a general response directing you to other ATO avenues  of service.