You are here

Summary of Assessable Income from Trusts pre 01/01/2002

Document
Summary table of assessable income for pensions

The following table summarises the assessment of income from discretionary and non-discretionary trusts. Assessable income from only one or the other kind of trust is covered elsewhere in this section.

Assessable Income

Description

Trust profit

The trust's profit is not assessed. Only income paid to the person and deeming are assessed.

Distributions

The distributions are maintained as income for 12 months from the date of resolution to distribute.

Distributions are shown in the:

  • distribution schedule in the trust's income tax return, and
  • person's personal tax return.

Imputation credits paid with distributions are income for the purposes of the pension income test.

Unpaid distributions

(Distributions not received by the beneficiary but held in the trust.)

Not a financial investment, and therefore, not subject to deeming.    

Wages or salary

The trust may pay wages or salary to the person. As with any wages or salary, the amount assessed as income is the current rate of earnings converted to an annual figure.

Loan to trust

The balance is added to the person's other financial assets and is subject to deeming.    

Assets gifted to the trust

Deeming provisions apply and deprived assets are maintained in the assessment.

Managed investments and shares sold/transferred to the trust

Deemed income is assessed in respect of any deprivation, if the person has not received adequate financial consideration.

Consultant's fees

Are assessed as the:

  • amount received on the most recent personal income tax return, or
  • current rate of on-going fees.

Fees paid for the use of plant or equipment owned by a person

Are assessed as income.

Rent paid to a person

Is assessed as rental income. Allowable deductions reduce the assessable amount.    

Trustee's remuneration

Is assessed as the amount stated on the most recent:

  • personal income tax return, or
  • trust tax return.


A discretionary trust is a private trust set up by an individual or individuals either to:

  • hold property or investments, or
  • run a business.

In virtually all cases the trust deed gives absolute discretion to the trustee to distribute both income and capital among the beneficiaries as he or she sees fit.

A non-discretionary trust is a trust for which the terms of the trust deed do not give the trustee discretion about whether to:

  • pay or apply income, or
  • choose to whom the trust is distributed.

A deprived asset is an asset:

  • that has been disposed of for less than its value (that is, adequate financial consideration has not been received), and
  • the value of which is included in the value of the person's assets for the purpose of determining that person's rate of pension.

For adequate financial consideration to be received when disposing of an asset, a person must receive value in the form of money or assets. Adequate financial consideration can be accepted when the amounts received reasonably equate to the market value of the asset. It may be necessary to obtain a valuation from a property valuation service provider.

When disposing of income, in order for adequate financial consideration to be received, the person must receive money, goods or services which approximate in value to the rate of disposed income. If a person disposes of an income producing asset and receives adequate financial consideration in money or money's worth for the asset, then it can be accepted that they have received adequate financial consideration for the disposal of both the income and the asset.