So, if you’ve got a trust set up for investment or business purposes, there are a few things you need to do to get ready for tax season. Here’s the deal: a trust isn’t technically a legal entity, it’s more like a formal agreement where one entity holds property for another entity’s benefit. This means that the way a trust is taxed is different from individuals or businesses, depending on how it’s set up.
Anyway, there are some administrative tasks you need to handle to stay on top of things. First, you should have a meeting before June 30th each year to document how you’re gonna distribute to beneficiaries. If you haven’t done this for 2023, you should speak to someone who can review your accounts and advise you on how to handle the beneficiary distributions.
Second, you need to keep records of income and expenses for five years after you file the income tax return. If your trust has multiple properties or earns income from overseas, you need to keep separate records for each one.
Third, make sure you’ve got all the necessary documentation handy. You’ll need to keep records of the trust deed, trustee contact details, trustee resolutions, statements of assets and liabilities, business contracts, and any relevant records for employing trusts.
Finally, effective trust management involves keeping good records to protect assets, streamline tax returns, and maximize allowable deductions. If you need help with this, a professional can assist you with record keeping, investment management, ensuring compliance with the trust deed, and simplifying administration.
Oh, and one more thing – the ATO has changed the rules around distributions, so it’s important to get advice on how to allocate income to beneficiaries. So, talk to someone who can help you prepare for your next trust tax return.