Family Trust Distributions Checklist: Important End of Financial Year Tips for Trustees

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Checklist for family trust distributions and resolutions at end of financial year.

” ’cause it’s always been a matter of trust

Billy Joel’s hit song ‘A Matter of Trust’ from his 1986 album The Bridge.

This is an important end of financial year reminder to everyone with a family trust!  

It’s getting to that time of year when trustees need to look at the distribution of income amongst the potential beneficiaries of their trust.  

It is important that trust resolutions in relation to income distributions are effective, as invalid trust resolutions can have disastrous tax consequences. 

There are a lot of important considerations to factor in when making trust resolutions.  

We’ve compiled a quick checklist of the key items below as a prompt to chat to your advisor about these matters in more detail.

  1. Read the deed. If there is one item on this checklist to remember, it is “READ THE DEED”! Every decision made for the trust must be consistent with the provisions in the trust deed, and it is imperative that you review the trust deed to ensure it is valid, it hasn’t vested (or ended), and that it contains the powers relied upon in making the trust resolutions. 
  1. Check the definition of income and what you can distribute. For example, can you stream capital gains and franking credits to specific beneficiaries? And it is important to ensure that all the income (as defined in the deed) is distributed, otherwise default income distribution provisions may produce an adverse outcome.  
  1. Check you can actually distribute to the beneficiary you want to distribute to. For example, if you want to distribute to a company, does the deed allow for a corporate beneficiary? Are there any family trust elections or interposed entity elections that may have an impact on the taxation of distribution decisions to particular beneficiaries? 
  1. Check the process and requirements for making resolutions. Most resolutions must be in writing and sometimes the consent of a guardian may be required. Make sure you allow enough time to request and receive that consent if that is the case.  
  1. Check the dates that the resolutions must be made by. This isn’t always 30 June, so make sure you’re on track to meet your deadline. We recommend setting up an annual calendar or email reminder, especially if the resolutions need to be made before 30 June. 
  1. Give genuine and good faith consideration to the beneficiaries in deciding who to distribute to. This is particularly important in light of recent legal cases where trustee decision making has been challenged. Your advisor may recommend actually writing to potential beneficiaries to formalise this consideration process, so you’ll need to allow some additional lead time to action this.  
  1. Be mindful to comply with Section 100A. This has been a huge focus area for compliance in the last 12 months. Please speak to your accountant about this to make sure you aren’t at risk of being penalised.  

Get professional advice.

At Aintree Group Legal we can review your trust deed in collaboration with your accountant. We highly recommend that you sit down with professional advisors to discuss all of the checklist items above before you make any concrete decisions about your family trust distributions.  

Phone | 03 9851 7999
Email | legal@aintreegroup.com.au