A recently published white paper on trust beneficiary statements from Knowledge Shop says accountants are now discovering that trust returns won’t validate without trustee benefit statement (TBS) labels being completed.
“Trustee beneficiary statements were introduced in 2007 to replace ultimate beneficiary statement rules. The risk for trust clients is not just around the 2024 return, but any historical non-compliance,” the paper read.
The ATO said it would use TBSs to check whether a beneficiary had correctly declared their share of trust net income using data matching and any inconsistencies would be flagged.
Regarding SMSFs, the white paper said although the ATO previously had guidance on its website on funds that held unit trusts, it has not been updated.
The paper recommends that SMSFs instead read the approach taken by the regulator in ATO ID 2002/676, where the unit trust is likely to be treated as a closely held trust and a TB statement would be required.
“This is because the ATO suggests that an SMSF is unlikely to be treated as a fixed trust, which basically means that it would be treated like an individual when applying the 20/75 test to see if the unit trust is closely held,” it read.
“As the position isn’t as clear as it could be, the conservative approach would be to make a TB statement to try and eliminate the risk of penalty tax being triggered on the distributions.”
The paper said when a trust makes a distribution to the trustee of another trust and that distribution includes certain components then a TBS is required unless a specific exclusion applies.
Excluded trusts include complying super funds, complying approved deposit funds, pooled superannuation trusts, deceased estate (but only up until the end of the income year in which the fifth anniversary of the death of the individual occurs), a fixed unit trust where all of the beneficiaries are exempt entities and have fixed entitlements to all of the income and capital of the trust, and a unit trust whose units are listed on the ASX.
Additionally, a trust doesn’t have to make a TBS if it has made a family trust election (FTE) or an interposed entity election or forms part of the family group of an individual (the specified individual) on the basis that it is wholly owned by that individual, certain family members and/or trusts that have made an FTE with that specified individual.
