4.7.3.40 Assessable Income from Non-discretionary Trusts pre-01/01/2002

Summary

This topic provides information on the following:

  • assessment of income from non-discretionary trusts (1.1.N.100),
  • assessment of trust income which includes franking credits (1.1.F.175), and
  • description of income assessment for different roles within trusts.

Note: For the income test treatment of general business items also see 4.7.1.20. The assessment of general business items applies to all business structures including sole traders, partnerships, private trusts and private companies.

Act reference: SSAct section 8(1)-income'

Assessment of income

Beneficiaries to non-discretionary trusts MAY have an interest in the trust income depending on the nature and terms of the trust deed. The share of the trust income that is allocated or distributed by the trustee/s to a beneficiary is assessable income.

Allocations and distributions are assessed as income for 12 months.

Act reference: SSAct section 1073 Certain amounts taken to be received over 12 months

Assessment of franking credits

The following table describes the assessment of trust income which includes franking credits.

If an income support recipient is… Then the…
a pensioner or allowee,
  • cash dividends paid to them are held as income for 12 months from the date distributed, under SSAct section 1073, and
  • franking credits paid with the dividend ARE income for the purposes of either the pensions or allowances income test.

Explanation: Franking credits are also known as imputation credits (1.1.I.25).

Description of income assessment for different roles within trusts

The following table describes the roles of individuals within the trust and the treatment of their trust related income. A person may have more than one role, and each needs to be considered separately. The definition of these roles is in the Complex Assessment Officers Handbook.

Role Description
Settlor Does NOT usually receive income from the trust, but the deprivation of income provisions MAY apply to loans or gifts.
Contributor

MAY receive income from interest on loans.

Deeming applies to the:

  • balance of any loan, or
  • value of a deprived asset (1.1.D.110).
Beneficiary Is entitled to a fixed proportion of the distribution of income from the trust. This is held as income for 12 months from the date of distribution.
Trustee MAY receive wages, fees, or salary. The current rate payable is held as on-going income. 'Out of pocket' annual basis expenses are NOT income.
Last reviewed: 3 January 2017