Private Wealth Assistant Commissioner, Amy James-Velagic, shares some valuable information and insights on FTDT. Helping taxpayers get it right is a key focus for the Tax Avoidance Taskforce Trusts Program for 2025–26.
Can you explain why FTDT is so topical and why the ATO's concerned?
We recognise that FTDT and related issues remain topical for trustees and their advisers. That's why it's important to clarify what we're doing and how taxpayers and their advisers can manage family trust elections (FTEs) and interposed entity elections (IEEs) to limit their exposure to FTDT risks.
We’re seeing an increase in FTDT issues due to inadequate record keeping and succession planning, intergenerational expansion of businesses, and the evolution of private groups.
We're concerned there's a lack of understanding by taxpayers and their advisers regarding the future consequences and limitations that FTEs and IEEs can have on private groups over time. This is resulting in an increase in FTDT risks. There's also a lack of awareness about the compounding nature of FTDT, which is resulting in significant liabilities.
A lag between the making of the distribution outside of the family group and the discovery of FTDT may also result in large liabilities. This can also lead to significant general interest charge (GIC) accruing on late-paid FTDT. Importantly, GIC ceased to be deductible from 1 July 2025.
What's the ATO doing to assist taxpayers to more easily comply?
We're continuing to raise awareness of these risks. We're also updating our Family trust webpage guidance to provide guidance to advisers, trustees and taxpayers about the significance of the consequences and the potential longer-term limitations that arise when making elections.
We've updated the FTE (NAT 2787 form, PDF, 322KBThis link will download a file) and IEE (NAT 2788 form, PDF, 287KBThis link will download a file) forms to clarify that the ‘public officer’ or ‘a director of a corporate trustee’ can sign the declaration.
While taxpayers and advisers have always been able to call us to confirm details of all lodged elections, elections lodged with us from January 2020 weren't being displayed in Online services for agents.
We're happy to announce we've corrected this and now all elections lodged with us are showing in the Online services for agents FTE and IEE report. This means that registered agents can now see these elections without having to call us.
Additionally, we're exploring further enhancements in Online services for agents to display more information about elections lodged.
Why are there limited administrative options for taxpayers with significant FTDT liabilities?
We've extensively reviewed the administrative approaches that are available under the current legislation.
We have no powers to ignore the application of FTDT. There's no discretion to determine that FTDT not be applied where the taxpayer or adviser claims the FTDT liability arose because of a mistake or 'no tax mischief'.
Because FTDT liability automatically arises when a distribution is made outside the family group, we can’t limit our review and collection of FTDT liabilities to the general 2 or 4 year period of review applying to income tax. We're required by law to collect all payable tax liabilities owed to the Commonwealth.
We're unable to grant more time to vary or revoke an election or to allow a distribution decision to be reversed.
How can trustees or entities with elections in place prevent FTDT?
You can prevent FTDT by maintaining good tax governance and keeping records of elections and lodging your elections with us. We've updated Online services for agents to allow your lodged elections to be viewed online to assist with your record keeping.
We recommend that you review your elections annually and vary or revoke them, if required and where the conditions and time periods to do so are satisfied. If your review of your elections finds you have an FTDT liability, lodge the Family trust distribution tax payment advice form (PDF, 251KB)This link will download a file form (NAT 6175) and pay now. This is critical as the cumulative FTDT and GIC can be materially significant.
It's important to be mindful of the 'specified individual' and ‘family group’, particularly for entities in and outside the family group when making distributions, to ensure you don’t trigger FTDT.
We urge private groups and their advisers to have a comprehensive understanding not only of the current benefits derived from making elections, but also the future limitations, constraints and potential financial impacts that they can have on the private group in generations to come.
While the concessions that can come with making an election now may seem advantageous, the long-term implications can be restrictive and result in material financial implications for the private group. We encourage you to plan for the long term and don’t make further elections without thinking about the future intergenerational impacts and limitations. Otherwise, you may be essentially locking yourself into unforeseen future consequences.
We’re sharing this advice because we want to help private groups get it right and stop any recurring FTDT issues going forward.
Will you remit GIC on FTDT?
FTDT is generally due and payable 21 days after the conferral or distribution. GIC is applicable 60 days thereafter.
We can only remit GIC in those circumstances identified in section 8AAG TAA 1953. We have guidance on our approach to the remission of GIC in PS LA 2011/12.
In FTDT matters, generally GIC will accrue as a result of a distribution being made outside the family group, where the electing entity has not identified and therefore not complied with their FTDT obligation, resulting in late FTDT payment. In this situation the delay is caused by the entity due to their acts or omissions.
Where an electing entity has taken reasonable steps to mitigate the effects of those circumstances, up to 31 December 2026, we may consider it fair and reasonable to remit GIC:
- 80% remission down to 20% of GIC liability remaining – where a taxpayer has:
- proactively self-reviewed their FTDT liability (before a review has commenced)
- lodged the Family trust distribution tax payment advice form (PDF, 251 KB)This link will download a fileform (NAT 6175)
- paid the FTDT
- partial remission (less than the above scenario) – where a taxpayer has:
- made a voluntary disclosure of an FTDT liability during the early stages of a review (prior to audit)
- lodged the Family trust distribution tax payment advice form (PDF, 251KB)This link will download a fileform (NAT 6175)
- paid the FTDT.
The electing entity would need to provide us with a GIC remission request with sufficient information to allow us to decide that it was fair and reasonable (i.e. on a case-by-case basis).
We would generally consider it's not fair and reasonable where:
- a risk review identifying FTDT risks has progressed to an audit
- we've issued a FTDT notice to the electing entity
- there's evidence of mischief, tax avoidance, fraud or evasion.
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