Company owned by a trust - tax return question

If a trust owns a company, and the company loses money, what does the trust's tax return look like?

For example:

Trust makes $10 from dividends, and owns A pty ltd. A pty ltd loses $5. Does the trust... distribute $5 or $10 to its beneficiaries? If it distributes $10, where's the deficit come from?

 

Is the trustee a shareholder of the company?

Did the company pay a dividend?

They are 2 different tax entities and a loss in one doesn't directly effect the income of the other.

 

The trustee is the sole shareholder, for benefit of beneficiaries (i.e. the trust owns the company wholly).

No dividend paid.

So I guess in that case the trust still has $10 to distribute, and the company's loss can only be used to offset future company profits?

 

Can trust distribute to company?

 

If the company is a beneficiary it possibly could. But should it?

 

If the company makes a loss it may have ac/fwd tax loss and lodges its tax return to report that loss. The trust may not have any income if its sole expected source of income is supposed to arise from company profits. If it has other income then it may report that income BUT the trust doesnt pay tax. It generally would distribute to beneficiaries. Any franking credit is also distributed.

trust tax returns are quite complex and will be returned if they contain errors

 

if the trust is merely a shareholder of the company then the losses cant be distributed to the trust. as Paul says they will get carried forward.

 

Thanks I understand now. Trusts not being a legal entity but a taxable entity causes confusions sometimes.

 

It certainly does!