When do you need to have your trust distributions minutes prepared by??

It’s almost 30 June.  Have you done your trust distribution minutes?

If you have a discretionary trust, then 30 June is an important date for you.

This is because, before 30 June, a trustee must exercise its discretion to decide which beneficiaries to make ‘presently entitled’ to the trust’s income for that income year.

The trustee’s decisions are recorded in the distribution minutes for that income year, which need to be carefully prepared to deal with things like:

  • How ‘trust law income’ is to be defined for this income year;
  • Whether the trustee will exercise discretion to determine ‘trust law income’ on the same basis as taxable ‘net income’;
  • Whether the trustee will decide to ‘stream’ specific categories of income like capital gains and franked distributions; and
  • Whether a default beneficiary or ‘balance’ beneficiary will be nominated to deal with any amounts not effectively distributed (such as if the trust is audited in future).

If a trustee fails to exercise its discretion before 30 June, then usually the trustee itself will end up being taxed on the trust’s taxable income for that year, and at the top marginal rate!

The ATO used to allow trusts up to two months to prepare and execute their distribution minutes.  However, with the withdrawal of the ATO’s IT 328 and IT 329 guidance, 30 June is now a hard deadline.

If you need assistance to prepare your trust distribution minutes prior to 30 June, and to make sure those minutes deal with the issues above, call Andreyev Lawyers on 1300 654 590 or email us.

You can also download a copy of our Trust Distributions Guide here.

Trust Distributions Guide

You can also check out our extensive Trust Distribution Resources here.

 

The information contained in this post is current at the date of editing – 20 November 2023.

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