Trusts calculate net income under Division 6 ITAA 1936 by aggregating all income (including CGT gains at item 58) and deducting allowable expenses/losses. Tax losses from business activities offset other income before distribution, but cannot create or increase overall losses for beneficiaries. Distributions must reflect present entitlements per trustee resolutions by 30 June
Illustration: A trust that has generated a capital gains tax (CGT) gain but also has a tax loss from business income. When attempting to distribute the CGT gain to a beneficiary, the business income loss gets distributed along with it.
1. Open each beneficiary's worksheet and select Manual distribution type.
2. Enter the CGT gain amount at item 58; input $0 for business income (do not distribute losses).
3.Avoid using the Beneficiary worksheet for net capital gains—instead, create a separate CGT worksheet linked to an individual beneficiary for precise allocation.
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