Accessing Primary Production Concessions for Beneficiaries of Loss Trusts
In light of recent bushfires devastating Australia and causing significant losses for many businesses, understanding special rules allowing beneficiaries of loss trusts to utilize primary production concessions is crucial.
Income Averaging and Farm Management Deposits (FMD)
Income averaging, outlined in Division 392 of the ITAA 1997, enables individual primary producers to even out their income and tax liabilities across multiple years. Similarly, FMDs help smooth income by allowing deductions when made and inclusion in assessable income upon withdrawal.
Eligibility Criteria
To qualify for income averaging, a taxpayer must be an individual primary producer operating in Australia for at least two consecutive years. Likewise, for FMD deductions, the taxpayer must be actively engaged in primary production at the time of making the deposit.
Beneficiary Eligibility
When a trust operates a primary production business, beneficiaries can be considered engaged in the business if they're entitled to a share of the trust's income for the year.
Special Rules for Loss Trusts
For loss trusts, special rules outlined in S.392-20(3) for income averaging and S.393-25(5) for FMDs ensure eligibility despite no income in the trust.
Fixed Trusts
For fixed trusts, individual beneficiaries can be considered involved in the primary production business if:
- They would have been entitled to a share of income if the trust had any.
- The manner of benefit for each beneficiary isn't significantly affected by discretionary powers.
Certain Entitlements Requirement
This requirement means the trust's structure shouldn't have substantial discretionary elements, like:
- Characterizing receipts or expenses as income or capital.
- Adding new beneficiaries in a way that significantly alters existing interests.
- Appointing a beneficiary's interest to another without consistency.
Get in Touch
For further assistance or inquiries, reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.
