What you need to know about the ATO’s crackdown on Trust Distribution Resolutions

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What you need to know about the ATO’s crackdown on Trust Distribution Resolutions

If you have a discretionary trust (aka. a family trust), we want you to be aware that the ATO will no longer offer any leniency towards trust distribution resolutions completed after 30 June.

 

What’s happened?

Trust distribution resolutions are required to be completed prior to 30 June each year and cannot be altered in any way after this date. The ATO has announced their rigid position on this and will look to enforce it where possible.

What does this mean to you?

In layman’s terms, if you don’t complete your trust distribution resolution before 30 June, you could end up paying extra tax of up to 47% of Trust profits.

Wait, what! Why?

If a Trustee of a Trust doesn’t pass their resolution to distribute the income of the Trust before 30 June, the ATO may assess the Trustee based on the Trust income at the highest tax rate of 47%. Typically, the beneficiaries usually get taxed at a lower rate.

How we can help you

Hopefully, you’ve decided that the risk of paying extra tax is not worth it and (if you’re not already doing this) you’re ready to complete your trust distribution resolution before 30 June.

Preparing a trust distribution resolution before 30 June isn’t necessarily a simple and straight forward task. That’s why we need to act as early as possible so that we can help you comply with the taxation laws and ultimately – save tax.

The process is as follows:

  • We’ll look back at your past Trust Distribution Resolution
  • Confirm the predicted Trust income of your Trust for the year
  • Ensure that your Trust Deed incorporates the income definition and distribution clauses and allows for the upcoming Trust Distribution Resolution
  • Finalise the Trust Distribution Resolution and have the Trustees execute the documents before 30 June

As we always do, we’ll recommend any additional tax-saving strategies that come to light as we complete this process.

Time is of the essence – Contact us now.