Do you have a family trust?  The ATO have tightened the requirements around the distribution of income.  If you don’t follow the rules, you could end up paying a lot more tax than you intended.


Your discretionary trust’s distributable income is the net income for tax purposes which beneficiaries will be entitled to receive, in accordance with the trust deed (rules of the trust). The allocation of your trust’s net income for the current financial year needs to be determined before 30 June, and trust minutes are used to inform the ATO of the allocation.  These decisions and Trust Minutes must be done before 30 June each year.

ATO legislation stipulates that distributable income should be calculated prior to 30 June, and should the ATO request verification, signed trust minutes of the trustee’s resolution in this regard are required. In abiding by the ATO legislation, your trust distribution can avoid default beneficiaries unexpectedly becoming 'presently entitled' to the income and being taxed on it, or if there is no default beneficiary, avoid the trustee being taxed at the highest marginal tax rate (47% as at 2018).

Valid trust distribution minutes must provide clear methodology of the determination of each beneficiary’s entitlement. Therefore, it is important that the minutes are prepared accurately and with reference to your trust.

How we can assist you

At PJT Accountants we work closely with our clients to assist in the preparation of trust minutes that comply with the ATO requirements.

Generally, this requires the preparation of draft interim financial statements for your trust.  We then use these figures to estimate the trust’s final net profit and calculate your trust distribution percentages. We will then prepare your trust distribution minutes for you to sign.

Upon the resolution of your trust’s net (distributable) income for financial year ending 2018, written minutes of this resolution will ensure that the ATO will have the information available as to the specified beneficiaries’ entitlements, ensuring trust income is not automatically taxed at the top marginal rate after 30 June 2018.

What should you do?

Arrange a trustee meeting with PJT Accountants without delay, to discuss trust resolutions for net income distribution, particularly if there are franked dividends and capital gains to be considered.

If you would like more information or need to discuss this tax incentive in more detail, please contact your PJT Business Advisor on 5413 9300.