Show download pdf controls
  • When to lodge a family trust election

    As a family business, there's a range of business structures you can consider to best suit your needs. Setting up a trust to hold a family’s assets or conduct a family business is a common and valid way to access certain tax concessions.

    However, to be valid, the trust must satisfy specific tests. Having ‘family trust’ in the trust's name doesn’t mean it’s a valid family trust for tax purposes.

    To be considered a family trust for tax purposes, the trustee needs to make a family trust election (FTE) in the approved form, and satisfy the relevant tests.

    The income year specified in the FTE must have ended before the FTE is made. This is because an FTE can only be made if the trust passes the family control test at the end of the specified income year.

    Once the FTE is validly made and in force, all distributions must be made to beneficiaries within ‘the family group’. It’s important to understand who is within the family group because distributions made outside of it will be taxed at the top marginal rate applying to individuals. This is called the family trust distribution tax and is intended to ensure only beneficiaries within the family group benefit.

    See also:

    Last modified: 02 Jul 2019QC 59518