Key Changes To Trust Administration To Affect Lodgements 

Changes are being made to trust administration as a part of the Modernisation of Trust Administration Systems project, which will impact the way in which you lodge your trust tax returns this tax season. 

These changes were first announced in the March 2022 Budget as the Digitalising trust income reporting and processing measure. These changes are to begin on 1 July 2024 and are set to encompass 2023-24FY returns and onwards, it’s critical to be aware of what is to come.

The MTAS project primarily aims to:

• Streamline the taxpayer lodgment experience
• Improve the quality, accuracy and integrity of annual income tax return information reported by trustees and beneficiaries
• Enable the ATO’s compliance activities to be better informed.

Of key importance is that the MTAS projects will deliver changes to annual tax return forms to simplify reporting for trustees, beneficiaries and the trust’s tax agents. Here is a simplified guide of what to expect to change with your tax return this financial year in terms of trusts:

Beneficiaries

This year’s income tax return will look different if you are the beneficiary of a trust. A new form must be lodged this year with your income tax return, known as the trust income schedule. It replicates fields from your statement of distribution, which must be copied across.

The trust income schedule will now support the reporting of beneficiary trust income.

The new schedule:

• Won’t replace any existing trust income labels in
  beneficiary income tax returns
• Is intended to support existing reporting obligations
  » for individual beneficiaries, and will be incorporated into the existing income details schedule
  » for non-individual beneficiaries – via a new schedule lodged with each beneficiary income tax return

This information for the income trust schedule should be obtainable from your trust, and a copy of the trust statement of distribution can be asked for from the trustee (as long as it relates to your entitlement to trust income).

If a distribution of trust income is received from a managed fund, it should be included in the new trust income schedule.

If you lodge your return via a tax agent, the new trust income schedule will be integrated into their existing lodgement software.

Trustees

A change is coming to the labels in the statement of distribution section of your trust tax return from 1 July 2024.

Four capital gains tax (CGT) labels are being added into the trust tax return statement of distribution, which should allow beneficiaries to be appropriately notified of their entitlement to income and assist with calculating their CGT amount in the return.

To support beneficiaries in correctly completing the trust income schedule, it is recommended that you provide them with a copy of the trust statement of distribution – so far as it relates to their entitlement to trust income.

If you are a trustee and a beneficiary of another trust, you must complete a trust income schedule. It’s recommended that the information required to complete the trust income schedule be provided as early as possible to beneficiaries.

As your registered tax agent, we may be able to assist you with the preparation and lodgement of your tax return, particularly with respect to the new changes being introduced from 1 July 2024. Start a conversation with our team at Lee & Lee today to find out how we can be of service to you this tax season.