The Australian Taxation Office (ATO) recently announced that it will be looking at whether trustees are properly lodging tax file number (TFN) reports for TFN withholding for closely held trusts.

Beneficiaries are required to quote their TFN to trustees to avoid having tax withheld from payments or unpaid present entitlements. Once a TFN has been provided to a trustee the trustee is required to report in that quarter to the ATO.

In the event the trustee has not been quoted a TFN from a beneficiary, trustees are required to withhold amounts from distributions made to beneficiaries by:

  • withholding tax at the rate of 47%;

  • paying that withheld tax to ATO; and

  • reporting annually on all withheld amounts.

Failure by a trustee to comply may result in a penalty equal to the amount of tax the trustee failed to withhold.

For more information on how the trustee withholding rules may affect you, please contact:

Rod Payne
T: 03 5226 8541

Alasdair Woodford
Senior Associate
T: 03 5225 5217