'Modernisation of Trust Administration Systems' (MTAS) comes into effect: new reporting requirements for trusts and beneficiaries

Amendments to reporting requirements for trusts, including SMSFs that are beneficiaries of trusts, came into effect on 1 July 2024. These income tax reporting changes are being implemented by the ATO under the ‘Modernisation of Trust Administration System’ (MTAS).

The new requirements include modifications to the labels in the ‘statement of distribution’ contained in trust tax returns, introducing a ‘trust income schedule’ that all trusts which are beneficiaries and receive trust income will need to lodge with their return, and new data validations processes for lodgements (which are designed to strengthen the integrity of data reported through the lodgement process).

This article provides an overview of the MTAS regime, the key changes trustees and beneficiaries will need to be aware of, as well as commenting on any particular implications for SMSFs.

What is the MTAS Project?

The Modernisation of Trust Administration Systems project was first announced in the March 2022 Federal Budget as the ‘Digitalising trust income reporting and processing’ measures and has since come into effect from 1 July 2024. The MTAS project introduces changes to, amongst other things, the annual tax return forms for trustees, beneficiaries and their tax agents.

The ATO has implemented the MTAS project with an aim to achieve the following stated outcomes:

• streamlining the taxpayer lodgment experience through the ATO;
• improving the quality, accuracy and integrity of annual income tax return information reported by trustees and beneficiaries to the ATO; and
• enabling ATO compliance monitoring to be better informed.

What changes are being implemented?

Statement of Distribution Labels

One of the changes that has come into effect this financial year, is an update to add new capital gains tax (CGT) related labels in the statement of distribution of the trust tax return. The new CGT labels are as follows:

• gross capital gain;
• capital losses applied;
• CGT discount applied; and
• CGT small business concessions applied.

The ATO has noted that these changes are intended to ensure that trustees can appropriately notify beneficiaries of their entitlement to income and support the calculation of their CGT amount in their tax return.

Trust Income Schedule

Another change to come into effect is the introduction of a new trust income schedule. This will need to be lodged by all beneficiaries of trusts with their tax return. The trust income schedule is designed to assist the ATO by ensuring accurate reporting of income from trusts.

From the 2024 income year onwards, if a distribution is received from a trust, it will be necessary to complete and lodge a ‘Trust income schedule 2024’ and attach it to your trust tax return. The trust income schedule will need to include details of each distribution that the relevant taxpayer has received from trusts during the income year.

The trust income schedule:

• is intended to support the existing reporting obligations which apply to beneficiary trust income; and
• is available from the ATO’s website, while the ATO’s instructions on how to complete the trust income schedule are linked here.

The requirement to lodge a trust income schedule will also apply in respect of self-managed superannuation fund annual returns, where an SMSF is beneficiary of a trust.

If a distribution of trust income is received from a managed fund, this should also be included in the new trust income schedule. The trust income schedule instructions will show how the information on the tax statement provided by the managed fund is reported on the trust income schedule.

Data Validation Processes

Further, new data validations have been added to the trust tax return form in the ATO’s practitioner lodgement service. These technical changes have been designed to strengthen the integrity and security of data reported to and by the ATO through the tax return lodgment process.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and speak to a member of the Commercial Practice Group.

More Cleardocs information on related topics

• SMSF Trustees: Why Should I Use A Corporate Trustee?
• Family Trusts and End of-Year Distributions – Revisiting the Benefits of the ‘Bucket Company’ Structure
• Reminder for SMSF trustees: be aware of legal requirements for accessing superannuation early

Order related document packages

• Superannuation (SMSF) Documents
• Trusts Documents