Tax Planning Strategy #4 – Trust Distribution Resolutions BEFORE 30 June

If you have a Family Trust (also known as a Discretionary Trust) YOU NEED TO READ THIS!

From the 2011/12 financial year, Trustees who distribute the income of a Trust through a resolution to beneficiaries must do so BEFORE the end of the financial year (June 30) for the resolution to be effective in determining who is to be assessed on the Trust's income.

This is a recent change to the Trust taxation laws that applies to this financial year, and future years.

If a Trustee fails to make a resolution to appoint the income of the Trust before the end of the financial year, the Trustee may be assessed by the ATO on the Trust income at the highest marginal tax rate (i.e. 46.5%), rather than the intended beneficiary(s).

Before 2012, the ATO allowed a certain amount of discretion as to when a resolution could be prepared.

However, the ATO now takes the view that following the recent decision in Colonial First State Investments v FC of T 2011 ATC 20-235, trustees must now resolve to distribute the current year’s income on or before year end to ensure the beneficiary is presently entitled to trust income.

What You Need to Do

You need to provide us with a Profit & Loss Statement for each Family Trust that you have for the period 1 July 2013 to 31 March 2014. You also need to send us details of all income earned by all family members during the period 1 July 2013 to 31 March 2014, and your estimated income for the period 1 April 2014 to 30 June 2014, including any capital gains.

We will then review all options for you, and recommend the most tax effective manner to distribute your Family Trust profits. We will then prepare the appropriate Trust Distribution Resolution for you to sign before 30 June 2014.

As always please contact us for any advice or assistance.

Your action now may save you thousands of dollars of unnecessary tax payments!

Published : 04 Jun 2014

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