May 2012 Newsletter

In this edition:

Welcome

Super Contributions: What are the rules? (Part 2)

Trustee housekeeping requirements

Changes to the taxation of car fringe benefits

Feature: Death and taxes in Superannuation (Part 2)

Safeguarding your assets post January 2012

Before the end of each financial year, the Trustee of the trust will need to identify the beneficiaries to which the trust income will be distributed. This process is often documented through a resolution of the Trustees prepared according to the rules of the Trust. 

The ATO requires that the tax file number (TFN) of the beneficiaries identified as being entitled to a distribution be quoted to the ATO. If this is not quoted to the ATO through the TFN report the Trustee will be required to withhold tax from the distributions identified as being made to the beneficiaries at the top marginal rate plus Medicare levy, currently 46.5%. Please note that in relation to the 2012 financial year a 0.5% flood levy may also apply.

The TFN report is required to be lodged with the ATO within one month of the quarter end in which the beneficiary's TFN details are provided to the trustee. Effectively for distributions made in respect of trust income derived to 30 June 2012 these TFN's will need to be reported to the ATO by the 31 July 2012. Please note that it is only the TFN of beneficiaries previously not provided to the ATO that need to be reported.

It is the responsibility of the Trustee to ensure that valid TFN's are reported to the ATO before a distribution is made otherwise they will need to withhold tax from any entitlement a beneficiary may have to the income of the trust. In addition the Trustee will be responsible for ensuring the trust is registered for PAYG Withholding and that all withheld amounts are reported and paid to the ATO within the required timeframes. In order to avoid this scenario it is advisable that you contact your tax agent with any previously unquoted TFN's so that a TFN report can be lodged.

Minors

In the 2011 Budget the Federal Government announced that, with limited exceptions, minors will no longer be eligible for the Low Income Tax Offset. This will affect the amount of distributions made from trusts to minors from 1 July 2011.

Previously, with the application of the Low Income Tax Offset, the tax free amount distributable to minors was $3,333 for the 2011 year. From the 2012 financial year onwards, the first $416 of distributions made to minors will be tax free, the amount between $417 and $1,307 will be taxed at 66%, and any amount over $1,307 will be taxed at 45% plus any levies that may also apply. 

In relation to distributions to minors, the Trustee is responsible to pay the tax to the ATO. Consequently, the Trustee will need to determine the tax payable on any distributions made to minors in excess of $416 which will be payable by the Trustee on lodging the trust return.

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