Trustee Resolutions

If you operate your business through a trust and you wish to make beneficiaries presently entitled to trust income for the 2024–25 income year, you should ensure your trustee resolutions are effective. This includes where you may want to make beneficiaries specifically entitled to franked dividends and capital gains that are included in trust income to stream these amounts.

Note that you do not have to prepare the trust accounts by 30 June to make beneficiaries presently entitled to trust income.

It is important that the trustee:

 makes decisions consistent with the terms of the trust deed. Check that the trust has not vested, as this may impact distribution decisions;

 consider who the intended beneficiaries are and their entitlement to income and capital under the trust deed. If the trustee has made an FTE or interposed entity election (IEE), this may have a tax impact on distribution decisions;

 notify beneficiaries of their entitlements to allow beneficiaries to correctly report distributions in their tax returns, preventing trust income from being omitted;

 follows any requirements in the trust deed governing the making of trustee resolutions, including the need to make the resolution in writing and when it is required to be made (there is no standard ATO format). Resolutions making one or more beneficiaries presently entitled to the trust income need to be made by the end of the income year;

 ensures that resolutions are unambiguous; and

 if the trust has capital gains or franked distributions the trustee would like to stream to beneficiaries, confirm the trust deed does not prevent this and that the trustee has complied with the legislative requirements relating to streaming these amounts.

Trustee checklist

To help trustees, the ATO has published a useful checklist in the form of a series of questions.

 Do you have a complete copy of the trust deed?

 Who can you appoint income or capital to?

 Has the trust vested?

 Is there an FTE in force for the trust?

 When do you have to make resolutions?

 Does a resolution have to be in writing?

 Is the wording of your resolution clear and unambiguous?

 Is the entitlement vested?

 Can the entitlement be taken away?

 How should you calculate and report the income of the trust?

 Are you ‘streaming’ capital gains or franked distributions?

 Are you seeking to ‘stream’ other types of income?

 Have all entitled beneficiaries quoted their tax file number (TFN) to you?

Family trusts

Family trust distribution tax (FTDT) happens when a trust that has made an FTE, or an entity that has made an IEE, makes a distribution outside the ‘family group’ of the individual specified in the FTE. This includes when distributing to another entity. The rate of FTDT is 47%.

So, where an FTE or IEE has been made, it is important to identify who is in the family group.

For non-fixed (discretionary) trusts to be within the family group of the individual specified in the FTE of another trust, they would need to have either:

 an FTE with the same specified individual in place; or

 an IEE as a member of the specified individual’s family group.

There is also a risk of not satisfying the qualified person rules where dividends are paid to a discretionary trust that has not made a family trust election. This means there could be restrictions or even the inability for the trust to pass on to beneficiaries franking credits attached to distributions of dividend income.