Compulsory Tax File Number (TFN) reporting for Closely Held Trusts
Background
The Australian Taxation Office (ATO) has recently introduced new TFN Withholding rules for closely held trusts.
These rules are to apply for the income tax year ended 30th June 2011.
What is a closely held Trust?
A closely held trust for the purposes of the TFN withholding rules is:
- a trust where an individual or up to 20 individuals have between them - directly or indirectly, and for their own benefit - fixed entitlements to a 75% or greater share of the income 75% or greater share of the capital of the trust ('the 20/75 test'), or
- a discretionary trust.
Trust Details 2011 Report - What Trustees need to do
Providing beneficiary details to the ATO
All beneficiaries of closely held trusts are required to provide the following information to the Australian Taxation Office to avoid withholding at a rate of 46.50% from their distribution:
- Tax File Number
- Full Name
- Date of Birth
- Business or residential address
- ABN (if applicable)
What if Trustees don’t provide TFN details?
Trustees are then required to:
- Register for PAYG withholding with the ATO
- Withhold 46.5% of any distributions made to beneficiaries during the year
- Lodge an annual activity statement with the ATO and pay to the ATO the amounts withheld
- Provide a payment summary to each beneficiary that had amounts withheld from payments
Annual withholding report – providing details of amounts withheld
When the trustee is required to withhold an amount the trustee is required to lodge an annual trustee withholding report.
The Australian Taxation Office does not request that the report be lodge if no amounts have been withheld.
Annual trustee payment report – providing details of payment made
Whether or not the trustee is required to withhold any amounts, the trustee is required to lodge an annual trustee payment report advising the Australian Taxation Office of the amounts paid to beneficiaries.
You are required to provide the following information to the Australian Taxation Office in the Annual Trustee Payment Report:
- The amount of any payments made by the trustee to each beneficiary that are subject to the TFN Withholding rules; and
- The amount (if any) withheld from those payment.
This report will be prepared with the 2011 trust tax return.
Further information
http://www.ato.gov.au/businesses/content.aspx?doc=/content/00154163.htm
For additional information please contact our office or send an email enquiry through the contact us tab on our webpage.
