I understand that net income (profit) must be distributed by a hybrid discretionary trust (HDT) at the end of each tax year; but net loss cannot be distributed and must be quarantined (carried forward) in the trust to be offset against any future income. My question is in regard to capital gain / loss by HDT. We plan to sell one of the properties in our trust. If there is a capital gain from the sale, then I understand that the trust can distribute the gain to the lower income beneficiary. However, if there is a capital loss, then is this capital loss stayed in the trust and carried forward to be offset against any future capital gain? Or, what would the tax treatment be for it? Appreciated any views / comments. Thanks in advance.
Capital losses for a trust are treated just like any other entity. Losses are carried forward to set off against future capital gains, so they remain in the name of the Trustee until they are used up by the Trustee. See the general guide to Capital Gains Tax on the ATO website. Cheers, Rob
