As the 30 June deadline for trust resolutions approaches, it’s crucial for trustees and their advisers to be clear about their obligations. Here are our top tips.
Tip 1: Understand how income is defined in the trust estate
You must be familiar with your trust deeds and accurately determine the income of the trust estate for each financial year. Common errors include:
- actions that are inconsistent with the deed
- mistaking accounting profit for distributable income
- misinterpreting trustee powers.
To avoid these errors, you should review the trust deed:
- and distribute income according to each beneficiary’s entitlements
- to understand how it defines income.
Tip 2: Identify the trust's beneficiaries
You need to correctly identify the beneficiaries of your trust. Errors often occur when trustees fail to read the deed, distribute to non-beneficiaries, or distribute outside the family group when a family trust election (FTE) or interposed entity election (IEE) is in place. To avoid these errors, you should:
- identify beneficiaries as per the trust deed
- ensure all entitled beneficiaries quote their TFN
- ensure all entitled beneficiaries are notified of their entitlement.
Tip 3: Understand resolutions and present entitlement
You must make valid resolutions to appoint or distribute income to beneficiaries by 30 June of the relevant tax year. The recent decision by the Administrative Review Tribunal, in The Trustee for Goldenville Family Trust A/C Xiangming Huang and FCT [2025] ARTA 1355 confirms that timing is critical. If resolutions are not made by 30 June, default beneficiaries may be deemed presently entitled to the income or you may be liable for the tax on all income of the trust and taxed at the highest marginal tax rate plus the Medicare levy. Errors such as invalid resolutions and back-dated resolutions can be avoided by:
- reviewing the trust deed to confirm how and when resolutions must be made
- ensuring resolutions are clearly documented and made by 30 June.
Tip 4: Keep accurate and complete records
You must keep accurate and complete records that explain your expenses and losses. Bank statements and accounting records alone are not enough, as they often don't contain all the required details.
You need to:
- keep written evidence for each expense you claim
- retain records of losses from when they arise until the end of the period of review for the year they are deducted.
If you can't substantiate your claims, we may disallow your deductions and carried forward losses may be lost.
Tip 5: Check holding period rules
You and the beneficiaries of your trust must meet holding period rules to access franking tax offsets.
You should:
- review dividend and distribution statements
- confirm that both you and the beneficiary meet the rules.
To qualify, a beneficiary must exist and hold the interest for the required period. This can affect potential beneficiaries, such as those who only become entitled later.
If your documents don't follow the rules, you can't claim franking credits, unless an exception applies.
Support and guidance
We're here to help if you need guidance or support with your circumstances. You can:
- contact us by phone
- visit our online resources for further information on
- trust distributions
- trustee obligations
- record keeping.
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