Refer to Other deductions on the ATO website.
Name of each item of deduction and Amount: To add lines click [Ctrl+Ins].
Show at label Q any deductible losses and outgoings not already claimed by the trust at any other item.
If the trust is registered for GST, exclude any input tax credit entitlements for expenses incurred by the trust from the amount shown at label Q.
Former STS taxpayers
If the trust is eligible and has chosen to continue using the STS accounting method, it can claim deductions for the following expenses only when they are paid:
general deductions - for example, interest expense
tax-related expenses, and
expenses for repairs.
For more information on the STS accounting method, refer to Appendix 13 in the ATO Trust return instructions.
Losses and outgoings
You can claim a deduction for losses and outgoings if they are incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing such income.
However, under section 25-90 of the ITAA 1997, a partnership or trust may be able to claim a deduction for costs incurred in obtaining or servicing debt finance if the costs are incurred in earning foreign source income which is non-assessable non-exempt income under section 23AI or 23AK of the ITAA 1936. The amount of the deduction is subject to any reduction required by the thin capitalisation rules.
Debt deductions (such as interest and borrowing costs) incurred in earning assessable foreign source income which are not attributable to an overseas permanent establishment of the taxpayer should be included at Q. You can deduct these expenses against assessable income of the trust, subject to any reduction required under the thin capitalisation rules. Do not include them in the calculation of the Net foreign source income at label V item 23 Other assessable foreign source income or any other item.
You cannot claim a deduction for the following:
losses or outgoings of capital or of a capital, private or domestic nature, except where special provision is made in the income tax law
expenses incurred in gaining or producing exempt or non-assessable non-exempt income - except certain debt deductions under section 25-90 of the ITAA 1997
penalties or fines
income tax liabilities
entertainment - except in very limited circumstances, and
costs associated with borrowing and servicing debt to the extent that a deduction is denied under the thin capitalisation rules. Refer to Appendix 3 in the ATO Trust return instructions. The disallowed amount reduces the amount that would otherwise go in Q.
If a trustee borrows money to pay distributions to a beneficiary, the trustee will only be able to take into account the interest expenses incurred on those borrowed funds when calculating the net income of a trust estate in certain circumstances.
Refer to Taxation Ruling TR 2005/12 - Deductibility of interest expenses incurred by trustees on funds borrowed in connection with the payment of distributions to beneficiaries for more information. In order to be deductible, the interest expense must be sufficiently connected with the assessable income earning activity of the trust. There will be a sufficient connection if the purpose of the trustee borrowing funds is to refinance a returnable amount. Trustees who have incurred interest expenses on monies borrowed to pay distributions to beneficiaries should seek advice either from their professional advisers or from the ATO.
Show at label Q any expenses incurred by the trust in the management of its tax affairs.
Expenses incurred include:
the cost of attending an ATO audit
expenditure on your income tax affairs - that is, a fee or commission for professional advice where the advice is provided by a registered tax agent, or a barrister or solicitor
general interest charge imposed by the ATO on taxes and penalties not paid on time, and
a penalty for underestimating a varied GST instalment or PAYG instalment.
Show a deduction for the decline in value of a depreciating asset used for the management of the tax affairs of the trust at label Q. For more information about working out the decline in value, refer to Appendix 6 in the ATO Trust return instructions.
You cannot claim a deduction for costs for any offence-related matter - for example, the cost of defending a tax prosecution.
If expenditure allowed or allowable as a deduction is recouped, include the amount recouped in assessable income in the year of recoupment.
Losses on the disposal of traditional securities
Show at label Q any non-capital losses incurred upon the disposal or redemption of a traditional security which are deductible under section 70B of the ITAA 1936. For more information about gains and losses on traditional securities, including traditional securities that are convertible notes or exchangeable notes, refer to You and your shares (NAT 2632) on the ATO website.
TOFA amounts from financial arrangements
If the TOFA rules apply to calculate an assessable gain or a deductible loss on the trust's financial arrangements include at this item those losses relating to the financial arrangements.
Include at this item any TOFA losses (or part thereof) that have not already been included at:
Label S Net income or loss from business, item 5
Label G Gross interest deductions, item 9
If what is shown at label Q includes an amount that is brought to account under the TOFA rules, item 31 Taxation of financial arrangements (TOFA) must be completed.
Refer to Guide to the taxation of financial arrangements (TOFA) rules on the ATO website.
Payment of premium to a non-resident insurer
You cannot claim a deduction for insurance premiums paid to a non-resident of Australia for the insurance of property situated in Australia or of an event which can happen only in Australia where:
The premium would otherwise be deductible to the trust, and
Arrangements have been made to the satisfaction of the ATO for the payment of any tax payable or which may become payable in relation to the premium.
For more information about the tax obligations of non-resident insurers and/or their agents in Australia, visit the ATO website and search under 'insurance with foreign insurers'.
In some trusts, the trustee may have the power to make gifts or donations from the trust fund.
The trust can only claim a deduction for gifts (including cash) made to an organisation which is a deductible gift recipient (DGR). DGRs are endorsed by the ATO or specifically named in income tax law. Some of the types of bodies that can be endorsed as DGRs are public benevolent institutions, school building funds and approved overseas aid funds. To check whether the organisation is a DGR visit the abn.business.gov.au website
Gifts of $2 or more of certain property as well as money may be deductible. This includes gifts of property valued by the ATO at more than $5,000, and property purchased by the donor during the 12 months before the gift was made and shares valued at $5,000 or less acquired in an Australian publicly listed company at least 12 months before the gift was made.
If claiming a donation for property valued by the ATO at more than $5,000, or under the Cultural Gifts Program, or to National Trust bodies, keep the required valuation certificates.
A trust may elect to spread deductions over five income years or less where the gift is money or property valued by the ATO at more than $5,000. Special requirements apply for spreading deductions for certain environmental, heritage and cultural property gifts.
Deductions for gifts to DGRs. If this is the case, you will need to adjust the amount claimed at label Q.
Deduction for political contributions and gifts
Only individuals can deduct contributions and gifts to political parties and independent members and candidates.
Show at label Q the deduction for gifts to DGRs. The deduction cannot add to or create a tax loss. You will need to reduce the claim where the amount at item 20 Net Australian income or loss is a loss.
Show at label Q expenses incurred for subscriptions paid to:
trade, business or professional associations
other organisations where the subscription expense is incurred in producing assessable income, and
journals, or magazines where these relate to producing assessable income.
Do not claim for fees paid to acquire or retain membership of a sporting or social club or a political party.
Deductions for depreciating assets in a low-value pool
If the trust has allocated depreciating assets used for different income-producing purposes to its low-value pool - for example, some assets that are used for producing rental income and others that are used in carrying on a business - show the low-value pool deduction at label Q. refer to Appendix 6 of the Trust return instructions.
Film industry incentives
Refer to Australian film industry incentives on the ATO website.
7-050 Continuing use of the STS accounting method
16-010 When is a loss or outgoing incurred?
16-440 Deductibility of other subscriptions
16-740 Deductions for interest expenses
16-850 Deductions for tax-related expenses
16-942 Gift of $2 or more deductible
17-810 Low-value depreciating asset pools
20-330 Film concessions
23-000 Taxation of financial arrangements – TOFA
23-340 Traditional securities