Every income year, a discretionary trust must exercise its discretion to distribute its trust law income among the trust’s eligible beneficiaries. These decisions are recorded in the trust’s distribution minutes which must be signed prior to 30 June each income year.
However, there are a number of ‘tax traps’ that can spring up if these distribution minutes do not use certain specific words.
The main thing to remember is that trusts can only ever distribute trust law income, as it is defined in the trust deed. Trust deeds can use many different phrases to refer to trust law income (e.g. ‘trust income’, ‘income of the trust fund’ etc.), and the minutes must use the exact same words. If the minutes refer to some other concept of income, such as ‘net income’, ‘taxable income’ or ‘assessable income’, then those distributions will not be effective. That could result in the trustee being taxed on all the income that year, at the top marginal rate!
For this reason, the specific words in your trust distribution minutes are very important.
If you want your distribution minutes to be reviewed so they will not trigger a ‘tax trap’ like this, call Andreyev Lawyers on 1300 654 590. You can also download a copy of our Trust Distributions Guide here.
Our Great Lawyer Guarantee
We want to be part of your team over the long term. We'll achieve this by sticking closely to the following principles:
- We'll listen carefully to understand what you want to achieve. Then we'll thoroughly explain our advice and step you through the documents. You can be sure you'll know the full consequences.
- Our lawyers work as a team, so someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
- One of our key goals is to pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
- We only do what we're good at. You can be confident that we know what we're doing and won't pass on the cost of our learning.
- For advice and documents, we provide a fixed or capped quote so you don’t take price risk. If you're in a dispute, we'll map out the process and costs so you know what to expect.
- We're not in this game for our egos. We're in it for a front row seat to witness your success
We measure our success on how efficiently we have facilitated your objectives, enhanced your relationships, and reduced the level of stress for all involved.
If we sound like people you can work with, call us now on 1300 654 590 and speak directly with a great lawyer.