Taxing a trust

[fredo]

Tax on descretionary family trust

How is a trust taxed at the bracket of its earnings ? if soif a profit of 5000K is made no tax is payable is this correct

 

[kierank]

My understanding when using a trust is that you pass the earnings of a trust thru to the beneficieries where it is taxed at their rate. Hence, earnings in a trust are not taxed. If you don't pass the income to the beneficieries, I believe the income is taxed at the top personal rate.

I'm sure Dale or NickM will correct me if I am wrong.

KieranK

 

[DaleGG]

Originally posted by kierank
My understanding when using a trust is that you pass the earnings of a trust thru to the beneficieries where it is taxed at their rate. Hence, earnings in a trust are not taxed. If you don't pass the income to the beneficieries, I believe the income is taxed at the top personal rate.

I'm sure Dale or NickM will correct me if I am wrong.

KieranK

Hi

You are correct providing that the trust does actually distribute its profit. If it does not, then, the trustee pays tax at 48.5% on every dollar of profit.

Cheers

Dale