Tax File Number (TFN) reporting

The ATO has recently stated that it will review the 2011 Trust Tax Return ‘distribution statements’ to identify where a beneficiary has received a distribution and not quoted a TFN.

Editor: It would seem that the ATO is set to embark on a robust audit campaign targeting trusts and strictly applying the TFN withholding rules.

By way of background, a trustee of a trust is generally required to withhold 46.5% in tax from distributions where beneficiaries fail to provide their TFN.  If the trustee does not withhold tax, it can face fines or penalties.

The simple message is that all trustees should ensure they have beneficiaries' TFNs before making distributions. 

Compliance action

Trustees will be selected by the ATO based on considerations such as:

  •     size of distribution; and
  •     whether the beneficiary appears to have returned the distribution as income.

The letter forwarded to trustees will:

  •     explain the measures;
  •     provide the ATO’s understanding of the facts;
  •     ask the trustee to confirm whether the ATO’s understanding is correct; and
  •     explain to the trustee how they can rectify the situation going forward, noting there may be penalties/remission.