ABN & TFN for Trust and Trustee?

Discussion in 'Accounting & Tax' started by SOULFLY3, 25th Sep, 2015.

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  1. SOULFLY3

    SOULFLY3 Well-Known Member

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    As per my title,
    I have my current accountant saying both the trust and the trustee require an ABN and TFN. for EOFY tax purposes.

    I spoke with my solicitor and her accountant said only Trustee requires abn & tfn .

    The trust if a discretionary family trust

    any help would be great as this is so confusing

    Thanks!
     
  2. D.T.

    D.T. Specialist Property Manager Business Member

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    Just the Trust needs ABN / TFN.

    It may not even need ABN depending on what it's doing.
     
  3. SOULFLY3

    SOULFLY3 Well-Known Member

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    Thanks DT, (im not good with any of this tax stuff!)
    But Its set up for a development
     
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Where a company acts solely as a trustee for a trust it does not need a TFN and it has NO entitlement to a ABN as it does not conduct an enterprise and / or make supplies. It just complicates things and the ATO start sending things to the entity in its own right as well as trustee and confuses everything. I def do not recommend the trustee have a TFN or ABN.

    The Trust will need a TFN and if its doing a dev it will definately need a ABN as well. This will all be needed for income tax, contractor payments reporting !! as well as possible GST registration if a sale is contemplated in the future. The ABN can easily have GST added at a later time if required. I generally advise my dev client to defer the GST regn until sales are ready to happen and contract are being drawn up (ie margin scheme)
     
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  5. SOULFLY3

    SOULFLY3 Well-Known Member

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    Thanks Paul :)
    Makes sense, Thanks for your help and the chat on the phone
     
  6. MRO

    MRO Well-Known Member

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    Maybe time for a new accountant?
     
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  7. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent Business Member

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    Disagree actually paul. When we did the voluntary disclosures the senior tax counsel advised that the trustee and the trust needed a TFN. The trust would lodge a return. The trustee a return not necessary. We have always followed that protocol. Terry can confirm he also had similar discussions with another senior tax counsel from the ATO. Frank egan would actually have the file notes and i know you know him paul. But the advice we have been provided is that both need a TFN. None may need an ABN. Why would you get a new accountant when that advice may in fact be correct.
     
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  8. D.T.

    D.T. Specialist Property Manager Business Member

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    o_ONone of my trustees have ever had TFN's
     
  9. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent Business Member

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    Yes i held the same view until about 4 years ago when doing the ato voluntary disclosures. As discussed terryw had the same discussion with a senior lawyer at the ATO about 8 months ago and they confirmed the trustee needed a TFN. Since then we do them for all of them. Cant see the point to be honest and you just ending up doing a return not necessary in the first year. But thats what the ATO has advised us.
     
    Last edited: 25th Sep, 2015
  10. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent Business Member

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    Paul

    Im confused if they are doing a development why would you wait until sale for registering for GST ? If for development purposes you would be claiming the input tax credits each quarter which assists most developers with their cashflow.
     
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  11. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    If your accountant doesn't know, then they should not be the accountant for this entity.

    Your paid professionals should be smarter than you on the topic you pay them for.
     
  12. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    I would suggest a trustee company that does nothing other than acting as trustee should get a TFN. There are limited exemptions for not having to get a TFN. If an entity is not required to lodge a tax return then no TFN is needed because of s202EC ITAA36
    http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s202ec.html

    It is my understanding that even a non trading company would need to lodge a tax return - a nil one in this case. So I think it should have a TFN.

    If the TFN is not needed then no harm is done.
     
  13. Gomez

    Gomez Member

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    My interactions with the ATO have given my slightly different information. In a nutshell, only the entity that should be lodging a tax return needs a tax return. This would normally be the trust (not the trustee) and any property development companies owned by the trust.

    ABN should only be required by an entity that trades, receives rent from residential property, pays contractors & suppliers etc. Usually a corporate trustee does not need an ABN (unless it trades/runs a business on top of just being a trustee) and nor does the trust (which is deemed to receive passive income through its shareholdings of underlying trust owned companies.

    Only the actual property development company sitting inside the trust needs an ABN.

    The only property related circumstance in which the trust itself may need an ABN is where it retains certain residential properties as a result of a joint venture arrangement with the property development company, and it then rents them out, so it would in effect be deemed to be running a business/trading.

    So in summary:
    * Corporate trustee (NO TFN/NO ABN) as long as acting solely as trustee
    * Trust (TFN Only - so it can lodge tax returns) - as long as it does not run a business/trades in its own name.
    * Property Dev Company (TFN & ABN Required)
     
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  14. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    I think the question to be asked is - "does a company without income need to lodge a tax return?"
    If the answer is 'yes', then a TFN is needed.
    s 161 provides that every person must lodge a tax return annually unless commissioner has given an exemption.
    http://www6.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/itaa1936240/s161.html

    I don't know if the Commissioner has given an exemption for trustee companies without income, but if he has then no TFN may be needed.

    But does the getting of a TFN do any harm?
     
  15. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Frank does not give advice these days. Regrettably. Those VDs probably needed a TFN since in many cases the ATO considered net trust income wasnt distributed validly or correctly and then they needed TFNs to issue default notices to the trustee.

    I have NEVER encountered any such issue dealing with ATO. A TFN is not needed for any person or entity if an entity does not produce income. By income I mean even $1 of income (as distinct from profit)

    The Commissioner has a long standing administrative concession that considers a COMPANY which acts solely as a trustee which does not derive income has no requirement to lodge. That can be triggered if the trustee fails to distribute net trust income and yes at that time a TFN should be applied for if its does not already exist. If the trustee is a potential beneficiary then I would also apply for a TFN on a case by case basis. For a trustee company that never intends to produce income or trade then no TFN is required.

    In some cases the trustee get issued a TFN by the Commissioner too. ie s99, s99A such as 111 222 333/001 etc

    Closely held trusts may also need a TFN is a trustee issue arises under TFN withholding reporting rules. Otherwise - excluded.

    The ATO TFN application process doesnt even consider a trustee a taxpayer. A beneficiary can be a taxpayer. So question one of the TFN process cant be met - The ATO own process recognises this https://abr.gov.au/ABRWeb/Apply/Abn...xationInformation&Target=ApplyTfn&pid=71&js=1

    The ATO requirement is that a trustee needs to apply a trust TFN (and maybe a ABN)
    Trusts - registering and reporting for tax

    I'm glad I understand trust tax law and administrative practice.
     
  16. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Residential rents arent reason to have an ABN. Mixed use or commercial property yes. Proposed sale of residential = yes. But just owning and renting = NO.

    Rent is considered passive income in reward for use of the property paid to the owner. Passive income falls outside the ABN requirements
     
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