Beneficiary income

Beneficiary income distributed by all types of trusts is taxable.

You need to know the difference between beneficiary income and ‘other distributions’ to work out if a distribution is taxable or non-taxable.

Beneficiary income is income earned by a trust and vested in or paid to beneficiaries in the same tax year, or the later of:

• 6 months after balance date
• the due date for trustees to file the trust income tax return (or the date the return was filed, if this is earlier).

Beneficiary income is taxable

Trustees must pay income tax on the beneficiary income on behalf of the beneficiaries unless we agree that the beneficiary can pay themselves.

Beneficiaries must return their beneficiary income in their Individual income tax return ─ IR3. They can claim a credit for the tax paid by trustees.

Other distributions

Distributions to beneficiaries that are not beneficiary income are called ‘other distributions’. Some are taxable and some are non-taxable.