Unit 2: Taxation of Trusts - 2024

Dive in depth into the various aspects of how trust income is taxed - from who gets taxed, treatment of capital gains, tests for applying trust losses and more.

In this unit, we cover:

• Who gets taxed?

  • When there is income to which no beneficiary is presently entitled

  • When beneficiary is presently entitled

• Present entitlements

  • Conditions for a beneficiary to be ‘presently entitled’

  • Legislative extensions

  • Timing of distribution

  • Income variation resolutions

  • Specific considerations for discretionary trusts

• Trustee distribution minutes

  • Reading the deed

  • Definitions of income

• “Net income” of a trust

• Taxing the beneficiary

  • Beneficiary presently entitled and not under legal disability

  • Beneficiary presently entitled but under legal disability

  • Minors

  • No beneficiary presently entitled

• “Net income” vs “Trust law income”

  • How is net income taxed when it differs from trust law income?

  • Proportionate vs Quantum approach (Bamford case)

• Beneficiary disclaimers of entitlements (Carter case)

• Trustee assessments & PS LA 2015/2

• CGT and trusts - an overview

• Some CGT events relevant to trusts

• How to treat capital gains in a trust

  • Streaming of capital gains

  • Flow through of capital gains - Subdivision 115-C

  • Specific entitlements

• Trust losses

  • Which tests apply to deduct a loss or debt in a trust?

  • 50% stake test

  • Same or similar business test (SBT)

  • Pattern of distributions test

  • Control test

  • Income injection test

Date recorded: 14 & 21 November 2024