There are special tax rules for trustees that invest in portfolio investment entities (PIEs).
Prescribed investor rates (PIR) for trusts
- 28% as a final tax
- 17.5% and include PIE income and tax paid in the end of year income tax return
- 10.5% only if the trust is testamentary (from a will) and include PIE income and tax paid in the end of year return
- 0% and have the income or loss and tax credits flow through to the trust's end of year return.
Trustees of superannuation funds cannot choose 10.5%.
Trustees of charitable trusts can only notify 0%.
If the trust does not provide a prescribed investor rate to the multi-rate PIE, PIE income will be taxed at the default rate of 28%. This default rate is not the same as notifying at 28%.
PIE income and end of year tax
A trust’s multi-rate PIE income must be included in an end of year tax return if:
- The trustees chose a prescribed investor rate of 0%, 10.5% or 17.5%.
- The trust has been zero-rated (taxed at 0%).
- The default rate of 28% was applied.
Losses cannot be included in trust returns if you choose 10.5% or 17%.
If the trust and the multi-rate PIE have standard 31 March balance dates, they'll each include the income as paid or received in the same year's tax return.
Dividends or distributions received from a multi-rate PIE are excluded income and are not included in the trust’s tax return.
If a trust’s income is taxed at the notified 28% prescribed investor rate, it is not included in the tax return.
For all other prescribed investor rates, including the default 28% rate, the income is included in the trust return. If applicable, it should be allocated as beneficiary income or remain as trustee income.