Assessment of the Trustee

A trust distribution gone wrong usually results in an assessment of the trustee. But what does that actually mean?

Assessment of the Trustee

In a discussion about trust distributions, somebody almost always mentions the possible assessment of the trustee. Especially when a trust distribution goes wrong, But what does the assessment of the trustee actually look like? This is the question Bradley Murphy and Darren Catherall of Murphy Tax in Sydney cover in this episode. Here is what we learned but please listen in as Bradley and Darren explain all this much better than we ever could.

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Assessment of the Trustee

The trustee receives the assessment of income in a myriad of scenarios, for example:

• The distributions goes to somebody who can’t be a beneficiary per the trust deedFor example the deed has excluded foreign beneficiaries to avoid extra transfer duty and land tax but the trustee declares a foreign beneficiary presently entitled,
• A non-resident or somebody with a legal disability (usually a minor) is presently entitled to income, or
• There is no default beneficiary and the trustee didn’t distribute the income before 30 June, or
• The distribution resolution was faulty in some way. Maybe it wasn’t dated, wasn’t signed, didn’t state the name of the trust or the name of the beneficiary.

Deliberate v DefaultThe assessment of the trustee might be deliberate. The trustee might decide freely to allocate the income to itself.But the assessment of the trustee could also happen by default, either:Intentionally: For example, the trustee allocates income to a non-resident or minor and is well aware that by default they receive the income in their assessment.By accident: For example, something went wrong with the distribution and so the ATO assesses the trustee.

Top Marginal Tax Rate

Whenever the trustee is assessed, the trustee is assessed at the top marginal tax rate for individuals. If the trustee is an individual, you also need to add 2% of Medicare levy. If the trustee is a company, there is no Medicare levy.

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s99B Carve Outss99B ITAA 1936Div 6E IncomeDisclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.