As we approach 30 June, the Australian Taxation Office (ATO) announced that it is reviewing adherence to trustee obligations including the lodgment of tax file number (TFN) reports for TFN withholding for closely held trusts.
Beneficiaries are required to quote their TFN to trustees to avoid having tax withheld from payments or unpaid present entitlements. Where TFNs are quoted, trustees are required to provide the ATO with a TFN report for each beneficiary. A TFN report must be lodged for a quarter in which a beneficiary quotes their TFN to the trustee.
Trustees are required to withhold amounts from distributions made to beneficiaries where beneficiaries have not quoted their TFN to the trustee. In these cases, the trustee must:
withhold tax at the rate of 47% from the distribution;
pay that tax to ATO; and
report in an annual report details of all withheld amounts.
Failure by a trustee to withhold tax from a distribution may result in a penalty equal to the amount that the trustee failed to withhold.
For more information on how the trustee withholding rules may affect you, please contact: