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Note: BGL does not provide accounting or taxation advice. The following is designed to act as a guide for Simple Invest 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps. |
Introduction
Profit allocation for Trusts will be finalised via the Distribute Profit screen in Simple Invest 360.
There are two methods to allocate profit for a Beneficiary Trust:
- Proportionate Method
- Income Streaming
This article will cover the Income Streaming method of profit allocation.
Note: This screen is currently only available for Trusts. For companies and individuals, please also check articles on how to calculate profit and loss for companies and how to allocate profit and loss for individuals.
What Is Income Streaming?
A discretionary trust provides the Trustee with the discretion to determine which beneficiaries receive distributions and the amount each year.
Using the Income Streaming method, the trustee can isolate and stream specific franked amounts or capital gains to be allocated to specific beneficiaries.
Important to note:
- Currently, you can only stream franked amounts and capital gains in Simple Invest 360.
- You cannot stream Franking Credits separately. These credits will be attached to the franked amounts that are streamed to the chosen beneficiary
- Capital gains can be distributed based on the capital gain type (discounted gains, other gains and indexed gains).
Navigation
| Navigate to Compliance from the Main toolbar | |
| select Period Compliance |
Select Start Year-End Workflow for the selected Period.
Note: The Period currently defaults to one whole financial year and can NOT be changed to a partial financial period.
As part of the Workflow, the Calculate Taxable Income screen will prompt, displaying a breakdown of items in the calculation of taxable income, allowing users to add adjustments where needed. Users may choose to change Tax Labels as well, where applicable.
In the next stage of Distribute Profit, the Earnings Breakdown will display with Earnings available for distribution showing as the subtotal.
Beside Income Streaming, toggle
Note
Once Income Streaming is toggled on, select the settings icon to allocate deductions relating to franked dividends.
Choose whether deductions are 100% allocated to Franked Distributions or proportionally allocated based on Accounting Income*
*Applies to all expenses where the tax label is "Other Deductions" or "Deductions Relating to Australian Investment Income" and the secondary tax label is set to "Relating to Franked Dividends"
Additionally, the option to allocate negative Non-Primary Production Income to Franked and capital gains is available:
From here, you will be able to see the franked and capital gains totals that are in accounting income and amounts that can be allocated to a beneficiary.
Basic information of the beneficiaries will also display. Users can hover the cursor beside beneficiaries to reveal the Edit icon to update beneficiary details.
To allocate, beside each beneficiary, enter either a dollar value or percentage.
Note
You are not required to stream the full franked amount or full capital gains amounts. Any of the Franked or capital gains amounts that are not streamed will then get added to the Remaining Earnings
You will need to complete the Remaining Earnings column to utilise the Tax Components section. This will define how the amounts that are not streamed will be split between the beneficiaries.
Tax Components
After streaming percentage/amount has been filled in, users are able to further update Tax Components based on the total Taxable Profit Available for Distribution.
Note:
- The Remaining Earnings column will need to be fully allocated to utilise the Tax Components section
- Where there is an overall loss or taxable loss, this section will be locked.
Users may scroll to the right to reveal full components:
Select to open the full list of tax components
Select/Unselect items to directly update the columns in the Tax Components section.
Note: Some components such as Franked Distribution cannot be deselected by default. These items can be noted by the lock icon:
Features
1. Autofill from Streaming Percentage
Select to automatically populate the tax components based on the Streaming Percentage input in the previous section.
By using the Autofill function, Franked Distribution and Franking Credits will be split based on the franked distribution %, capital gains will be split based on the capital gains streaming % and all other tax components will be split based on the Remaining Earnings %.
2. Manual Update Tax Components
Users are also able to manually update individual components
Note: The Franking Credits (D) column will be locked from editing and will be automatically updated in proportion to Franked Distribution (U). However, users may select the to edit these figures should they wish.
Residual = Total – Individual Components
3. On-screen calculator
Users can perform mathematical calculations directly on screen:
Once completed, select
System Journals
System journals will differ depending on the specific profit/loss scenarios.
For more information regarding the system journals posted, click here.
Reprocess Profit and Tax Distribution
System journals posted for earnings and tax distribution will be locked in the Transaction List.
To update the distribution, return to the Distribute Profit tab in Period Compliance.
Users are able to update the distribution details on screen.
Once clicking the system journals will be re-posted accordingly.
To remove all system journals posted from the Distribute Profit screen for the current financial year, select Reverse FY 20XX System Distributions on top of the screen
Beneficiary Balance Summary
Listed under the Financial Reports section, the Beneficiary Balance Summary Report is now available, enabling users to have an overview of the movements in the Beneficiary balance. This report will summarise the Profit Distribution processed from the Distribute Profit screen, as well as information regarding Capital Contributions, Loans, Gifts, and any Drawings over the selected period.
Beneficiary Distribution Summary
Listed under the Work Paper Reports section, the Beneficiary Distribution Summary is now available. It will summarise the Profit Distribution processed from the Distribute Profit screen, with a comprehensive breakdown of the Tax Components.
For how to access the reports, please refer to Reports in Simple Invest.
Frequently asked questions
1. Why is the Income Streaming toggle locked?
The Income Streaming toggle will lock when the Earnings Available for Distribution balance is negative. This is because the balance is at a loss, which you wouldn't be able to stream.