xample: Specific entitlementA trustee derived the following...

xample: Specific entitlement

A trustee derived the following amounts in the 2014–15 income year:

• interest income of $100
• a capital gain of $200 that is eligible for the CGT 50% discount.

The trust deed defines income to include capital gains. The income of the trust estate is therefore $300 ($100 interest income + $200 capital gain) and the net income of the trust is $200 ($100 interest income + $100 net capital gain because the CGT discount is applied to halve the $200 capital gain).

Provided the trust deed doesn't prevent the trustee streaming capital gains, the trustee can make:

• Beneficiary B specifically entitled to the $200 capital gain, and
• Beneficiary A presently entitled to the remaining $100.

Beneficiary B has a $100 capital gain to take into account in working out their own net capital gain. Because the gain was a discount capital gain, Beneficiary B must gross it up (double it) and apply the CGT discount (if they qualify in their own right for the CGT discount). Beneficiary A has a $100 share of net income.

On the other hand, if the trustee did not stream the capital gain, Beneficiary A is presently entitled to one third of the income of the trust estate and Beneficiary B is presently entitled to two-thirds. Beneficiary A is assessed on $33 net income and has a capital gain of $34 and Beneficiary B is assessed on $66 net income and has a capital gain of $67.