Tax Tip 450: Trustees Declaring Tax File Numbers

When a trustee operates a bank account or share trading account, they will need to quote a tax file number, or TFN.

Do they declare their own TFN or do they need a new TFN for the ‘trust’?

Ideally, they would declare the trust TFN. A trust is not a separate legal entity but it is a separate tax entity so the trustee should apply for a new TFN for the trust.

However, not having a trust TFN does not mean there is no trust. That can be established by other evidence and section 202DB(2)(b) ITAA36 states that where the trustee does not have a TFN in their capacity as trustee they may quote their own TFN.



INCOME TAX ASSESSMENT ACT 1936 - SECT 202DB Quotation of tax file numbers in connection with investments


Example

Marge pops out a kid, Maggie who gets $1,000 gifted to her on her birthday. Marge opens a bank account in Maggie’s name and Marge quote her personal TFN to the bank. The money is Maggie’s, Marge is just the legal owner.

 

The trustee typically will NOT apply for a TFN if its sole purpose is that of trustee (eg a Company trustee). This can create expectations for lodgements for a entity that wont produce income.

A trust expected to produce income should apply for a TFN so any datamatching etc is correct. .
A trust that needs a TFN may also include a deceased estate, unit trust, disc trust or many other forms of trusts both trading, investment and other activities. Some banks etc are very pedantic about a TFN however there is no oligation to quote one. No TFN withholding tax may be withheld IF interest above a threshold is paid.

A trust which does not make supplies should NOT apply for an ABN. eg It is an investment vehicle.. Many people use the incorrect process which starts with the business register and it can lead to mistakes like a ABN being issued.

Generally for a trust to possess a TFN the trust must be consituted in law and with settled assets and efforts to produce income have commenced. For example a TT wont generally apply for a TFN as a TT is a dormant trust until death occurs and assets transfer. Same with a company. Only ASIC registered companies can apply for a TFN. You may be surprised how many people try to apply for a TFN when they register a business name.

When a parent uses their TFN for a child in their capacity as guardian its important to exclude Maggies income from Marge's tax. The ATO will typically prefill based on the quoted TFN.