Variation of income resolutions for trusts

New information is available to help trustees understand the legal complexity and tax consequences of using variation of income resolutions for their trust.

The information will help you to make informed decisions as you review and finalise your trust’s resolutions by 30 June.

Your trust might include a resolution that states which beneficiary will pay any additional tax owed if a review or audit leads to an adjustment to the net income of your trust. This is known as a variation of income resolution.

The resulting tax consequences of these resolutions are complex to assess because each situation will have unique legal effects which are subject to trust law, not tax law.

Often, variation of income resolutions can have a different effect to the outcome intended. For example, the trustee, rather than the beneficiary named in the resolution, may be taxed on the additional income.

If you’re unsure about how this applies to your situation, speak with your tax professional.