Commentary on Sections Overview Overview Section 503: How beneficiary’s income is reduced
1477.This section explains how trustees’ expenses are taken into account in measuring a beneficiary’s income. It is based on section 689B of ICTA.
1478.Trustees are liable at the normal rates on the income of the trust. The beneficiary receives income net of tax and expenses, but is entitled to the gross income after expenses. So to calculate the true measure of the beneficiary’s income, the net income of each type is calculated, expenses are allowed against that income and what is left is grossed up at the normal rate for that type of income.
1479.Subsections (1) and (2) provide that, when trustees’ expenses are taken into account, they reduce different types of income of the beneficiary in a particular order.
1480.Subsection (5)sets out the calculation in step form. See Change 91 in Annex 1 and the overview commentary on this Chapter.