Chartered Accountants Australia and New Zealand (CA ANZ) has lodged a submission on the exposure draft Treasury Laws Amendment Bill 2025: Modernising trust administration systems (ED) and the accompanying draft explanatory materials (EM). The ED seeks to streamline how closely held trusts report beneficiary tax file numbers (TFNs) to the Commissioner with the aim to support pre-filling capabilities for beneficiaries' income tax returns, ensuring accurate tax payments by trustees and beneficiaries through data matching.

CA ANZ supports modernisation of trust and beneficiary reporting and compulsory TFN reporting for closely held trusts. However, the proposed amendments will not achieve the expected pre-fill benefits unless the current lodgment dates for tax returns are changed. The proposals will, however, allow the Australian Taxation Office (ATO) to improve its data matching and auditing ability. Treasury should consider modifying the explanatory memorandum to ensure that the achievable purposes of better data matching and reducing red tape are highlighted rather than pre-filling.

These amendments are an opportunity to update legislation and reduce red tape by consolidating TFN reporting requirements. Currently, closely held trusts need to report certain information on trust distributions made to beneficiaries that are trustees under Division 6D of the Income Tax Assessment Act 1936. This reporting includes the TFN of the trustee beneficiary and is included in the existing trust tax return. To further reduce red tape, it would be useful for the amendments to repeal Division 6D and include all reporting of TFNs associated with distributions in the current proposal.