If the client is small business, it will be eligible to the small business concession. Trade debtors can be excluded from the income, and trade credit will be excluded from expenses. if the financial report is prepared on Accrual Basis, the profit will not be as same as the profit for tax purpose.Then, the distribution in tax return will be different with the distribution in the financial report. Is this all right? or Just prepare the financial report basing on Cash Basis.
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Good question.
From the top of my head, the financial report should be using accounting standard for special purpose financial report, whehther it can be a cash base or accrual base, you need to check with accounting standard.
But the reality is trust's accounting distribution usually does not equal to tax distribution, which also need to consider the so-called present entitlement.
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It is small business, and then the accounting standards do not apply. Accounting standards is for public company or other organisations.
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You are right, it is not a reporting entity, and accounting standard is not required. Accounting standards are required to prepare the general purpose financial report for reporting entities. For non reporting entities, it is special purpose financial report.
Since you need lodge your financial report with ASIC and make a solvency declaration, if it is a trustee company, you would have followed some accounting standard, wouldnt you? You wouldn't book transactions purely out of imagination, right?
I guess my comment is you need to find out whether you can use cash base for the special purpose financial report you are preparing. It is purely from a high level view, might not be 100% accurate.
Furthermore, the trade debtors and creditors are balance sheet accounts and how trust recognises its income and expenses is not relevant to small business concession. SBE concession is more relating to stock taking, depreciation and CGT concession.
the difference of accounting trust distribution and tax trust distribution is common to all trusts, not only limited to SBE.
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