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Cash Flow Boost Taxability & Trusts

Enthusiast

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Replies 6

Hey Everyone

We are just chasing some guidance on the taxability of the cash flow boost.

The ATO Website says specifically below:

So it says - cash flow boost is non-assessable non-exempt income (Tax free) HOWEVER if you distribute from a trust to another person what happens then?

It says below there "May" be consequences for the recipient.

So - is it only taxable to the recipients if the trust deed does not have the ability to distribute untaxable and taxable income (ie can't separate out the distributions of different 'types' of income)?

Or are there other rules somewhere which states when the distribution from the trust would be taxable.

Just getting ready to do the 30 June trust distribution minutes and want to get it right!

Thank you

Alison

 

Blurb taken from - https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-...

"Tax consequences

You do not need to pay tax on the amount of the cash flow boost. However, if you distribute the cash flow boost from the business to another entity (for example, making a trust distribution or paying a dividend to shareholders) there may be tax consequences for the recipient"

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Devotee

Replies 5

@Alison normal rules would apply for the person receiving the income. They aren't a business receiving it as a cash flow boost but a trust distribution. So it would be classed as income for them. Depending on there tax situation they would pay tax on it. 

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Most helpful response

Devotee

Replies 5

@Alison normal rules would apply for the person receiving the income. They aren't a business receiving it as a cash flow boost but a trust distribution. So it would be classed as income for them. Depending on there tax situation they would pay tax on it. 

Enthusiast

Replies 0

I wonder if I can choose to not distribute that portion of the income.
I may have a further look into our trust deed.
Weird that it is non taxable in the Trust but changes to be taxable as part of any distribution. I would have thought it would keep it's status.
Thank you very much for your reply

Enthusiast

Replies 3

Also, if you are reporting tax on accruals, does this mean you should be recording all June cash flow boost payments (payable in July) at 30 June?
Because technically it is 'earnt' by then?
Thank you

ATO Community Support

Replies 2

Hi @Alison

 

If you account for your assessable income on an accruals basis, you include all income earned for work done during the income year. This is even if you hadn't received payment by the end of the income year. However, for any entity that receives the Cash Flow Boost directly, it is non assessable, non exempt.

 

Thanks, Ari

Enthusiast

Replies 1

Thanks Ari

Because we operate in a Trust.  Is the answer still the same?

I am reading our Trust deed today to see what it says about income retaining it's original 'status', and distributions of these.

So as long as it is tax free in distributions we don't include it, but if it does become taxable when distributed, should it be included then as income?

I read this this morning.  Is this the ATO's stance on it?

If the government cashflow boost is withdrawn from a company the payment will ultimately come out as an unfranked dividend. So, the $100k dividend could potentially incur $47,000 in tax. This tax treatment is not universal. The same payment to business operating through a discretionary trust, a sole trader or a family partnership will generate a different tax outcome to a company structure. The cashflow boost when paid to a trading discretionary trust, family partnership or an individual will retain its’ tax-free nature when the stimulus payment is used personally

ATO Community Support

Replies 0

Hi @Alison ,

 

Please have a look at:

Apply the information from the above links to your trust's circumstances and the distributions you're considering. If the taxable status for the received cash flow boost and/or when distributed can't be determined then please contact us

 

Thanks for posting,

JasonT