Capital Gains Tax Trusts

Capital Gains Tax Trusts

Please read our previous Blog on capital gains tax indexation and 50% discount for individuals regarding the general rules which apply.

The capital gains tax treatment of most trusts (other than a complying fund) is similar to individuals. However, special rules apply where there is a concentration of ownership in the trust.

Where the net income of a trust includes a discounted capital gain, that part of a beneficiary's share of the net trust income that is attributable to a discounted capital gain must be grossed up by applying a gross-up factor of 100%. This grossed-up amount is treated as the beneficiary's capital gain for the purposes of applying the beneficiary's capital losses before the CGT discount is applied, if applicable.

The same 100% gross â€"up is applied where the trust's capital gain is reduced by another concession, such as the small business 50% reduction concession, and not reduced by the general 50% CGT discount. If both the general 50% CGT discount and the small business 50% reduction reduce the trust's capital gain, the capital gain is multiplied by 4. The beneficiary can then apply its capital losses to the capital gain before applying the appropriate CGT discount percentage and/or the small business 50% reduction.