Question:
Trust TFN withholding tax and TFN reports
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
The Government and Tax Office have kindly provided yet another layer of bureaucracy for small businesses operating through trusts. Trustees are now obliged to withhold tax from distributions to beneficiaries if those beneficiaries have not provided their tax file number (TFN) and other personal details such as date of birth and address prior to the payment of the distribution.
Hopefully the following 8 paragraphs put the new rules into a logical sequence:
+ The Trustee should request that the beneficiary provide the following details before either actually paying a distribution or resolving to pay a distribution to that beneficiary:
– Tax file number;
– Date of birth;
– Residential or business address (physical street address);
– Postal address;
– Full name; and
– ABN if the beneficiary has one.
+ The trustee should complete a TFN report and lodge it with the Tax Office by the 28th day of the month following the end of the quarter when the distribution was either paid or resolved to be paid. The reference number for the Tax Office form is NAT 73651-02.2011.
+ If the beneficiary neglects or declines to provide the necessary details, the trustee is obliged to withhold 6.5% of the distribution from the beneficiary and pay that amount to the Tax Office under the PAYG withholding system. To do this, the trustee will need to register for PAYG withholding, remit the amount in a subsequent activity statement, provide the beneficiary with a PAYG payment summary and report the distribution and withholding for that beneficiary in the trust tax return for that year.
In an act of sublime generosity, the Tax Office has provided that the beneficiary’s TFN and other details can be reported for distributions occurring in the 2010 and 2011 income years by completing those details in the beneficiary distribution section of the relevant year’s trust tax return. Accordingly, it will be necessary to collect all those details and input those details into that section of the 2011 tax return.
But, take care in future years as it will be necessary to complete a TFN report each quarter where there is a new beneficiary for the trust. This applies even though that new beneficiary is simply a family member or entity from within the one business/family grouping.
NAT 73651-02.2011, TFN withholding for closely held trusts (Tax Office publication), TFN report, ss 12-175 and 12-180 of the Tax Administration Act
