Trust distributions are included in the tax estimates summary for TaxPlan, which may suggest that the distribution of trust income is a 'tax planning strategy.'
Background
When there is a trust included in your client group, the 'Before Tax Planning' summary shows all of the income to the trust and none to the beneficiaries. The 'After Tax Planning' summary then shows no income for the trust, with the beneficiaries allocated their correct share of income.
Reasoning
We decided to show a trust as having all income in the "Before Tax Planning" summary after receiving extensive feedback from many different accountants two years ago.
We believe that the allocation of trust income is indeed a tax planning exercise and should be explained to clients in this manner.
Amounts allocated to certain beneficiaries may change after specific tax planning strategies are recommended (e.g., prepayments, super contributions, etc.), and there needs to be a starting point for a client’s group.
We understand that there are several ways to display the effects of tax planning, and we have always aimed to use the approach that many of our users agree with.