The ATO on Fri 17.1.2014, reminded taxpayers that a consolidation of trust tax return labels has meant that the labels numbered 64A (income of the trust estate) and 65W (beneficiary’s share of income of the trust estate) in the 2012 trust tax return have been numbered 53A and 54W, respectively, in the 2013 trust tax return. The ATO says that, at label 53A, taxpayers must show “the trustee’s honest determination of the trust’s distributable income”.

The ATO says the trustee may think that the trust’s distributable income is calculated based on one of the alternative views in TR 2012/D1 eg according to a so-called income equalisation clause. If so, the ATO says taxpayers can include this amount at label 53A. Even if the ATO later considers the trust’s distributable income is a different amount, it says the trustee won’t have made an error in completing label 53A.

The ATO says it will use labels 53A and 54W to help it identify what may be “contrived differences” between the income of the trust estate and the net/taxable income of the trust eg to obtain tax benefits. Where these labels are incomplete, the ATO warns this will increase the likelihood it will review a taxpayer and may lead to a penalty for making a false or misleading statement.

[LTN 11, 17/1/14]