Trust tax return changes from 1 July 2024

Ahead of the 2024 tax lodgment season, the ATO has recently published an update on its trust administration changes for trustees, beneficiaries and tax agents which will take effect from 1 July 2024. These changes form part of the Modernisation of Trust Administration Systems (MTAS) project and will affect lodgments for the 2023–24 and later income years.

At time of writing the 2024 tax return stationery — which will incorporate the below changes — has not been released.

Changes to 2024 trust tax returns

The changes to begin on 1 July 2024 include:

• modifying the labels in the statement of distribution in the trust tax return to improve the reporting of beneficiary details
• introducing a new schedule (trust income schedule) that all trust beneficiary types who receive trust income will need to lodge with their tax return — this will assist correct reporting and facilitate consistency of reporting across all beneficiary types
• adding new data validations to the trust tax return form in the practitioner lodgment service — to strengthen the integrity of data reported through the lodgment process.

How the changes will affect …

Trustees

Trustees will notice that four CGT labels have been added to the statement of distribution section of the trust tax return. These changes will enhance the trustee’s ability to appropriately notify beneficiaries of their entitlement to income, and support the calculation of their CGT amount in their tax return.

Tip
To support beneficiaries in correctly completing the trust income schedule in their tax returns, it is recommended that the trustee provides them with a copy of the trust statement of distribution to the extent that it relates to their entitlement.

Beneficiaries

The trust income schedule will be a new form lodged with the income tax return.

The trust income schedule replicates the fields from the statement of distribution. The beneficiary can copy the information across.

Tip
The beneficiary should ask the trustee for a copy of the trust statement of distribution.

A distribution of trust income received from a managed fund should also be included in the new trust income schedule. The trust income schedule instructions will show how the information on the tax statement provided by the managed fund is reported on the trust income schedule.

If the beneficiary lodges via myTax, there will be messages that prompt them about potential trust income reporting.

If the beneficiary lodges via a tax agent, the new trust income schedule will be integrated into their existing lodgment software.

Tax agents

The ATO is adding:

• four CGT labels into the trust tax return statement of distribution
• data validations in the practitioner lodgment service to ensure accurate reporting.

Warning
The tax agent will not be able to submit without completing the necessary information.

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

• will not 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.

Beneficiaries will be able to get the information required in the trust income schedule from the trust. As the trust income schedule has been designed to align to the information on the trust statement of distribution, the agent should encourage their trustee clients to provide beneficiaries the information required to complete the trust income schedule as early as possible.

About the MTAS project

The MTAS project was announced in the 2022–23 Federal Budget as the ‘Digitalising trust income reporting and processing’ measure. The project 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.

As the MTAS project progresses, further changes will be implemented.

In March 2022, ahead of the Budget announcement, the former Treasurer announced the following:

Digitalising trust income reporting

The Government will develop systems to ensure all trusts will have the option to lodge income tax returns electronically. Digitalising the reporting of trustee and beneficiary obligations will reduce errors and processing times and create capacity to pre-fill beneficiaries’ tax returns.

This measure will facilitate electronic lodgement for up to 30,000 trusts that currently lodge by paper. There are just under 1 million trusts and around 1.8 million beneficiaries in the Australian tax system.

New systems are expected to be in place by 1 July 2024.

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