Issue:The “Y Share of Net Small Business Income” still appears under “Available” even after the income distribution has been completed.
Illustration:
Tax losses deducted $5000
Total income or loss $195,000
But, why is it the Small Business Income still showing as "Available"?
Guidance: The "Share of net small business income" in Item Y in the Beneficiaries distribution section of a Trust Tax Return 2024 is not reduced by the Tax Losses Deducted from prior year losses declared at Item 25 because the calculation of net small business income is based on the trust's net income before the application of prior year tax losses.
Item Y consist of current year income.
$195,000 + $5,000 - $200,000
To resolve, make sure to distribute the Item Y as well.
The deduction of prior year tax losses under section 36-15 of the ITAA 1997 is applied to the trust's net income after determining the total net income or loss at Item 24. However, the small business income tax offset entitlement for beneficiaries is calculated based on their share of the trust's net small business income, which is derived from the trust's business activities and does not factor in the reduction caused by prior year tax losses.
This approach ensures that the small business income tax offset is calculated on the actual business income generated by the trust, irrespective of the impact of prior year losses. Beneficiaries need to know their share of net small business income to determine their entitlement to the small business income tax offset.
ATO related link here