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Family Trust Distribution Tax

Last updated 25 April 2023

Family trust distribution tax happens when a trust that has made a family trust election (FTE), or an entity that has made an interposed entity election (IEE) makes a distribution outside of the family group of the specified individual in their election.

As year-end resolutions are being prepared, it is important to consider your client’s trust deed and who is and isn’t a beneficiary of the trust. Where an FTE or IEE has been made its important to identify who is in the family group.

Distributions to beneficiaries outside the specified individual’s family group will trigger FTDT at 47%. This includes when distributing to another entity. Trustees and their advisors should remain vigilant with FTEs and IEEs to remove the risk of FTDT applying.

For non-fixed (discretionary) trusts to be within another trust’s family group, they would need to have either:

  • a FTE with the same specified individual in place, or
  • an IEE to be a member of the specified individual’s family group.

To hear more about this and other trust topics such as resolutions and present entitlement, join our trusts webinarExternal Link on 24 May at 11:00 am. You will also have an opportunity to ask questions of our panel on trust matters.