Understanding How to Fill the Trust Tax Return

A trust doesn’t usually pay tax on its income. The trustee works out the trust’s net income and reports it on the Trust tax return, and the beneficiaries entitled to that income generally pay the tax in their own returns. The return shows the ATO what the trust earned and who is taxed on it.

This guide covers the Trust tax return 2026, for the income year 1 July 2025 to 30 June 2026. It follows the item numbers and labels in the ATO’s Trust tax return 2026 instructions, so you can work through the form and this guide side by side.

How a trust is taxed

The trustee lodges the return, and the trustee or public officer signs the declaration. Two figures drive the whole return.

Income of the trust estate: the income the trustee can distribute for the year under the trust deed and trust law, often called distributable income. It goes at item 57.

Net income: the trust’s taxable income worked out under tax law. It goes at item 26.

The two often differ, but the law links them proportionately: a beneficiary presently entitled to 40% of the income of the trust estate is generally assessed on 40% of the net income. Streamed capital gains and franked distributions are the main exception.

Under Division 6 of the Income Tax Assessment Act 1936:

• a resident beneficiary who is presently entitled and not under a legal disability declares their share in their own return
• the trustee is assessed on behalf of a presently entitled beneficiary who is under a legal disability (such as a minor) or is a non-resident at year end (section 98)
• the trustee is assessed under section 99A, at the top marginal rate, on net income no beneficiary is presently entitled to; the Commissioner can apply section 99 and lower rates instead where section 99A would be unreasonable, such as for many deceased estates.

Resolutions by 30 June

Beneficiaries of a discretionary trust usually become presently entitled through a trustee resolution. According to the ATO’s guidance on trustee resolutions, a resolution only counts for working out who is assessed if it is made by the end of the income year, 30 June, or by any earlier date the deed requires. Streaming has its own deadlines: a specific entitlement to franked distributions must be recorded in writing by 30 June, and to capital gains by 31 August.

If a resolution is missing or ineffective, default beneficiaries or the trustee may be assessed, possibly at the top rate. A sound resolution depends on knowing roughly what the trust earned before 30 June, which is why tidy books matter; see our article on trust accounting principles.

The main parts of the trust return

• Trust information: identity, trustee, elections, type of trust, tax payable by the trustee and refund details
• Business description and status: items 1 and 2
• Income: items 5 to 15
• Deductions: items 16 to 20
• Capital gains and foreign income: items 21 to 24
• Losses and total net income: items 25 to 27
• Other items, key financial information, business items, tax offsets and Medicare levy: items 28 to 56
• Income of the trust estate and the statement of distribution: items 57 and 58
• Trustee choice, beneficiaries under a legal disability and non-resident trusts: items 59 to 61
• Declarations, plus any required schedules

Trust information and elections

Identity and trustee details

Enter the trust’s TFN, name and ABN (if it has one), any previous name, and current and previous postal addresses. Then give the name of the trustee who should receive notices (for a company trustee, its name and ABN) and a daytime phone number.

Family trust and interposed entity elections

If the trust has a family trust election in force, write the specified income year as 4 digits (for example, 2026 for 2025–26). Print R to revoke the election or V to vary the test individual, and lodge the Family trust election, revocation or variation 2026 form. Interposed entity elections work the same way, with their own form. Once an election is in force, distributions outside the family group attract family trust distribution tax, currently 47%, payable by the trustee.

Type of trust

Choose the code that best fits:

Print X in the second box if the trust is also a charitable trust. Trusts coded F, M, U, P or Q also answer the managed investment trust (MIT) questions.

Tax payable and refunds

Answer Yes to “Is any tax payable by the trustee?” if the trustee will be assessed on any amount, such as income no beneficiary is presently entitled to or a non-resident beneficiary’s share. Add electronic funds transfer details for any refund.

Business description and status (items 1 and 2)

At item 1, describe the main business activity specifically and enter the 5-digit industry code at label A. Item 2 records whether the trust had multiple businesses (B1), ceased a business (B2) or commenced one (B3).

Business income and expenses (item 5)

Item 5 takes figures from the trust’s accounts, excluding GST, split into primary production and non-primary production.

Income labels include gross payments where an ABN was not quoted (C and D), assessable government industry payments such as fuel tax credits (E and F), and other business income (G and H).

Expense labels follow the profit and loss statement, including cost of sales (E), depreciation (K), repairs and maintenance (M), all other expenses (N) and total expenses (O).

Small business entities (aggregated turnover under $10 million) can instantly write off eligible depreciating assets costing less than $20,000 each that were first used or installed ready for use between 1 July 2025 and 30 June 2026. Claim these at label K and at item 51 label A. The 5-year lock-out rule, which normally stops a business that opted out of simplified depreciation from re-entering it, is suspended until 30 June 2026.

Reconciliation and net business income

Accounting profit rarely equals taxable business income, so item 5 has two reconciliation labels:

• Label A, income adjustments: add assessable amounts missing from the accounts and remove accounting income that isn’t assessable.
• Label B, expense adjustments: remove capital expenditure, provisions and non-deductible items, and replace accounting depreciation with the tax decline in value.

The result is net business income or loss at labels Q (primary production), R (non-primary production) and S (total). Print L next to a loss. Label V, net small business income, is what individual beneficiaries use to work out the small business income tax offset.

Other income (items 6 to 15)

Item 6 records tax withheld where an ABN was not quoted (label T) and foreign resident withholding credits (label U).

Item 8 covers distributions from partnerships and other trusts, with separate labels for primary production, non-primary production, franked distributions, related deductions and the credits passed through. Attach the Trust income schedule 2026 if you report a trust distribution. Capital gains received through other trusts go at item 21, and foreign income at items 22 and 23.

Item 9 is rent: gross rent at label F, then interest (G), capital works (X) and other deductions (H). Label Y covers capital works deductions at the 4% rate for eligible build-to-rent developments.

Items 10 to 14 cover:

• forestry managed investment scheme income (item 10)
• gross interest at label J, with TFN amounts withheld at label I (item 11)
• dividends: unfranked at label K (including Division 7A deemed dividends), franked at label L, franking credits at label M and TFN amounts withheld at label N (item 12)
• superannuation lump sums and employment termination payments, which mostly arise in deceased estates (item 13)
• other Australian income at label O (item 14).

Item 15 totals items 5 to 14.

Deductions, capital gains and foreign income (items 16 to 24)

Deductions (items 16 to 20)

Item 16 covers deductions relating to Australian investment income (label P) and to franked distributions received directly (label R). Item 17 is for forestry scheme deductions, and item 18 label Q for other deductions such as tax-related expenses and gifts (a gift can’t create a loss). For 2026, the $2 minimum for gifts to deductible gift recipients has been removed, and the general interest charge and shortfall interest charge incurred from 1 July 2025 are no longer deductible. Item 20 is net Australian income or loss.

Capital gains (item 21)

Answer label G to say whether a CGT event happened, and print any exemption or rollover code at label M. Label A is the net capital gain after capital losses, the CGT discount and any small business concessions. The discount only applies if the asset was acquired at least 12 months before the CGT event, and capital losses are applied first.

Attach the CGT schedule 2026 if total capital gains or total capital losses for the year exceed $10,000.

Foreign income (items 22 to 24)

Item 22 is attributed foreign income. Item 23 is other assessable foreign source income, with the net amount at label V and the foreign income tax offset at label Z. Item 24 totals items 20 to 23.

Losses and total net income (items 25 to 27)

Item 25 label C shows prior-year tax losses deducted this year, which can’t exceed item 24. Before deducting a loss, the trust must pass the trust loss tests in Schedule 2F of the Income Tax Assessment Act 1936.

Item 26, total net income or loss, is item 24 less item 25 label C.

Item 27 records tax losses (label U) and net capital losses (label V) carried forward. If they total more than $100,000, attach the Losses schedule 2026. A trust can’t distribute a loss to beneficiaries; it stays in the trust.

Other items and financial information (items 28 to 56)

Most of these won’t apply to every trust, but check each one:

• Items 28 to 32: landcare and water facility tax offset, overseas transactions, personal services income, taxation of financial arrangements, and non-concessional MIT income.
• Items 33 to 36: current assets, total assets, current liabilities and total liabilities from the balance sheet.
• Items 37 to 52: business and professional items such as stock, trade debtors and creditors, and depreciating assets.
• Items 53 to 56: tax offsets that flow through to beneficiaries, and the Medicare levy reduction or exemption. Item 54 label G, Other refundable tax offsets, has been removed for 2026.

Income of the trust estate (item 57)

Label A is the income the trustee can distribute for the year under the deed. It is not automatically the accounting profit or the net income at item 26. If it is a loss, print 0. Every percentage on the statement of distribution depends on this figure.

Statement of distribution (item 58)

The statement of distribution allocates the trust’s net income to each beneficiary, by type of income and credit. The trustee must also give each beneficiary their figures so they can complete their own return.

Working out each share

The ATO instructions describe 4 steps:

1. Work out the distributable income (item 57 label A).
2. Work out how much each beneficiary was presently entitled to, including amounts paid or applied for them.
3. Turn each entitlement into a percentage of distributable income.
4. If the deed allows it and the trustee made beneficiaries specifically entitled to capital gains or franked distributions, allocate those amounts to them, and share the rest of the net income using each beneficiary’s adjusted Division 6 percentage.

Beneficiary details and labels

For each beneficiary, give their TFN and name. Individuals also need a residential address and date of birth, and non-individuals a business address. The entity code goes at label U next to the TFN (C company, F fund, I individual, P partnership, S self-managed super fund, T trust), and label V is the assessment calculation code, which tells the ATO how the share is taxed. The form uses the letter U twice in this item: once for the entity code and again for franked distributions in the amounts below.

The main amounts are:

• W: share of income of the trust estate
• A and B: share of primary production and non-primary production income, with parts of B broken out at B1 (the part that is investment income), B2 (non-concessional MIT income) and B3 (amounts excluded from non-concessional MIT income)
• U and D: franked distributions (including attached franking credits) and franking credits, with the part of U that relates to an investment shown at U2
• F: capital gains, where F equals F1 gross capital gain less F2 capital losses, F3 CGT discount and F4 small business concessions applied
• G and H: attributed foreign income and other assessable foreign source income, with income from a financial investment included in H shown at H1
• C, E, L and O: shares of withholding credits
• Y: share of net small business income

Labels B1, U2 and H1 are new for 2026. The label for exploration credits distributed (M) has been removed, because the Junior Mineral Exploration Incentive ended on 30 June 2025.

The income and capital gains labels across all beneficiaries generally add up to item 26, and each credit label must match the credit reported earlier in the return. Beneficiaries also need to know which of their capital gains were discount gains and which they were specifically entitled to.

Where the trustee is assessed for a non-resident beneficiary, the taxable amount goes at label J or K. At the end of item 58, report any net income no beneficiary is presently entitled to. The trustee is taxed on it under section 99A, and capital gains in it lose the CGT discount and the small business 50% reduction.

Closely held trusts

A closely held trust is a discretionary trust, or a trust where 20 or fewer individuals hold fixed entitlements to 75% or more of its income or capital. Unless it is an excluded trust, it has two extra obligations:

• Trustee beneficiary (TB) statement: where a beneficiary is itself a trustee, say whether you are making a TB statement and, if so, report tax-preferred amounts at label P and the untaxed part of the share of net income at label Q. An incorrect statement can lead to trustee beneficiary non-disclosure tax, currently 47%.
• TFN withholding: if a beneficiary hasn’t quoted their TFN, the trustee must withhold from their payments and entitlements. Report the amounts withheld at label T and lodge the Annual TFN withholding report separately.

Trustee choice and non-resident items (items 59 to 61)

At item 59, a resident trustee can choose to be assessed on a capital gain if the deed allows it and no beneficiary received an amount referable to the gain during the year or within 2 months after. Show the amount at label Y; these gains don’t also go at item 58 label F. Item 60 asks whether a beneficiary under a legal disability is also entitled to income from another trust, and item 61 whether the trust is a non-resident trust.

Schedules you may need

• Trust income schedule 2026: if the trust is entitled to distributions from other trusts
• CGT schedule 2026: if total capital gains or capital losses exceed $10,000
• Losses schedule 2026: if losses carried forward exceed $100,000, and in some other cases
• Non-individual PAYG payment summary schedule 2026: for amounts at item 5 labels B, C or D or item 6 labels T or U
• International dealings schedule 2026: for a Yes at item 22 label S or item 29 labels W or O, among other triggers
• Reportable tax position schedule 2026: for MITs and CCIVs that meet the reportable tax position criteria, for income years starting on or after 1 July 2025

Without a required schedule, the ATO may not treat the return as lodged in the approved form.

How the trust return differs from a company return

If you have prepared a company tax return, items 1 to 56 will look familiar. The differences lie in who pays the tax:

• A company pays tax on its own taxable income. A trust’s net income is generally taxed to its beneficiaries, so the return needs a statement of distribution and reports distributable income (item 57) as well as net income (item 26).
• Present entitlement generally has to exist by 30 June, so trustee resolutions are time-critical.
• A trust can stream capital gains and franked distributions, and has its own loss tests, family trust elections, and closely held trust reporting.

Lodgement, payment and record keeping

The trustee can lodge through Standard Business Reporting (SBR) software, through a registered tax agent, or on paper. Trusts lodging through a tax agent usually follow the agent’s lodgement program, so due dates vary; check the date that applies. Late lodgement can attract a penalty.

If the return is lodged on time, tax payable by the trustee is due on the later of 21 days after the lodgement due date and 21 days after the notice of assessment. If it is late or never lodged, tax is due 21 days after the lodgement due date, and the general interest charge applies to late payments.

Generally, keep records for 5 years after they were prepared or the transactions were completed, whichever is later. For a trust, that includes the deed, all trustee resolutions, a statement of assets and liabilities, the trustee’s details at year end, and CGT records. Records supporting carried-forward losses may need to be kept longer.

Preparing a trust return in Lodgeit

Lodgeit prepares and lodges the Trust tax return from the trust’s accounting data. The help centre guide Preparation of Trust Tax Return (TRT) has videos and screenshots. In outline:

1. Gather the financial statements, trust deed, resolutions and beneficiary details.
2. Connect Lodgeit to the ATO by nominating it as your hosted SBR software in ATO Access Manager with your Lodgeit Software ID.
3. Add the Trust tax return for the client and select the year. Lodgeit fills in the lodgement due date from the ATO.
4. Import the financials directly from Xero, QuickBooks Online or MYOB, or use the Excel template or the Lodgeit Smart Excel Utility.
5. Review the automatic account mapping, and tag items that need special treatment, such as non-deductible expenses.
6. Check the Reconciliation tab, which bridges accounting profit to taxable income.
7. Allocate profits to beneficiaries and complete the distribution. The Working with Trust Accounts video covers allocating profits, absorbing retained losses, and beneficiaries’ capital and drawings.
8. Validate the return against the ATO’s SBR rules, fix any errors and mark it completed.
9. Send it to the trustee for e-signature, sign as the agent, and lodge.

See trust tax returns for more about the product.

This is general information, so check the current ATO instructions or a registered tax agent for the trust’s specific circumstances.