Trusts could pay Penalty Tax

Brisbane Business Accountant - Trusts and penalty tax

Over recent years the compliance requirements for trusts have tightened considerably. Neglecting these requirements could mean paying more tax or penalties.

Distributions determined by 30 June

All trust distributions must now be documented by 30 June. Clients who followed our advice to prepare minutes prior to 30 June 2014 will have documented an appropriate resolution in order to remain compliant.

The ATO may be conducting spot checks of trustee minutes. Previously an ATO review of minutes has only been necessary where a trust was being audited.

To ensure your records are in order, we would encourage all our trustees to provide us with copies of distribution minutes so we can add them to the trust file.

Where the ATO finds minutes to be ineffective, or absent, the trustee can be assessed for all the trust’s taxable income, at the top marginal tax rate.

TFN Reports – Beneficiaries

Trustees must record tax file numbers for beneficiaries prior to making a distribution. If no TFN is held the trustee is required to withhold tax at the top marginal rate, and then report and pay it to the ATO.

To avoid this, trustees must have beneficiaries provide them with TFNs prior to the end of financial year, and report these to the ATO by 31 July. (Actually this must all be done within a month of the end of each quarter, but we’re assuming here that a beneficiary has provided the TFN to the trust in quarter 4 of the 2014 financial year.)

Previously reported TFNs will not need to be reported again. However, beneficiaries who have not previously received distributions, or had their TFN reported, will need to be included. TFN reports cannot be backdated, so it is necessary to include all possible beneficiaries resulting from distribution minutes.

If you need assistance with any of these matters, or further advice about the circumstances of your trust, please call your Brisbane Business Accountant now.