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Trust Tax Returns: Documents Required And How To Lodge It

Do you have a small business and want it to turn into a big company? It is not very easy. As an owner, you have to take many responsibilities, from paying taxes on time to lodging a necessary tax return, etc. Failing to fulfil any of these duties may lead to difficulties, and you may have to bear huge penalties. So, you must know which documents you should need for the necessary tax return for your business and when you should file your tax return.

What are trust tax returns?

First, you should know what does trust tax mean. Of the different small business structures in Australia, trust is a major one. Unlike the others (partnership, company, or sole trader), trust is not a separate legal entity. Instead, it is based on the mutual relationship that occurs between the trustee and other persons. Here, the trustee’s assets or the property benefit the other persons, who are termed as ‘beneficiaries.’ From shares to property, business, or business premises, anything can be assets. The trustee sets some specific rules regarding managing and using the assets. These rules are called trust deeds.

Though trust is not a separate legal entity as per the definition, it is considered a separate entity for tax-related purposes. You have to lodge the necessary tax return on or before the due date. As the owner, you have to take responsibility for the lodgement. You can do it either yourself or with help from a professional tax return agent. As the income distribution in a trust is very much flexible, you can get maximum benefits from filing a tax return. We recommend taking assistance from any tax return agent who has years of experience and skills regarding the lodgement. This is because he can help you getting the maximum tax returns and complying with all the essential rules that you have to obey for tax filing within due dates.

Points to consider while lodging tax returns for your trust

The tax return of trust is a little different from company tax returns. We had already mentioned that the trustee distributes the total income among all the beneficiaries. According to the applicable tax rates, these shares get taxed. And this is how tax deductions and income policies work in a trust. If there is no beneficiary to claim the trust income, the trustee may assess the whole or significant part. In terms of tax-effective payment, a family trust is the best suitable option to stream the revenue for all the beneficiaries. However, the situation may not be the same for all kinds of trusts. And also, because the whole procedure is a hugely complicated task, we always recommend hiring an experienced tax agent who can give you an easier way out.

What documents do you need to submit while filing the tax return?

You will need the following documents to submit when you file the tax return for your trust.

  • Tax File Number

The Australian Taxation Office or ATO issues tax File Number or TFN to different legal entities like a partnership, superannuation, company, and trust. It is a unique identification number, but not every individual get the TFN.

  • Name of trust

When you submit the name of your trust, you must check whether it remains consistent every year, except the year when its change has been legally changed. In case of a name change, you should inform the authority by writing.

  • Australian Business Number

It is another unique number issued by the Australian Business Register or ABR. This 11-digited number is used majorly for tax purposes.

  • Full name of the trustee to whom the authority will send the notices

If your trustee is a person, you have to provide that person’s first name, surname or family name and also, given names, if applicable. If the trustee is a company, you should submit the full name and its ABN or Australian Business Number.

  • Trust election status and interposed election status for a family trust

You have to submit this information regarding your family trust under specific conditions. You can check these conditions on the official website of ATO.

  • Description of main business activity

From where does the gross income of your trust come? Is it cattle breeding, cloth manufacturing, vegetable farming, or any investment? Whatever it may be, you have to describe all the information in full detail and accuracy.

  • Business status

While filling the form, you have to write the appropriate description of the business activity. If your business has consolidation status, then you have to pay the tax for the period when your trust was not a part of any consolidated or MEC group.

  • Income except for foreign income

Here, you have to include business income, tax withheld, rent, amount of interests, gross interest, dividends, superannuation, etc.

  • Deductions

The deductions will primarily include deductions that are related to Australian investment income. Your trust can claim a deduction of 50% of the total LIC gain amount if the LIC directly pays a dividend to your trust. 

  • Taxation of financial arrangements

Taxation of financial accounts or TOFA applies if the aggregated turnover is about $100 million or more. If the assets value about $300 million or more, or if the financial assets value about $100 million or more. And the TOFA rule will be applied to your trust consistently even if your aggregated turnaround or financial assets’ values fall under the threshold values.

  • Overseas transactions

If there is any overseas entity or a person who directly or indirectly participates in controlling or managing the trust and vice versa, you have to include the necessary information.

  • Foreign income

Foreign income information will be required if an Australian carry out business operations in another country or a foreign resident carries out the function of an Australian business entity.

Ending note

For more information regarding how you will lodge the tax return, you can log on to the official website of ATO. And for the whole process to be done smoothly, you should seek assistance from an experienced financial advisor Perth.

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