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Prepare your trust distribution resolutions

We will have your resolutions prepared and signed before 30 June, with the beneficiaries checked against the deed.

There is one date in the trust year that cannot be moved. If the trustee has not effectively resolved to distribute the trust’s income by 30 June, it can be assessed on that income itself. The rate is the top marginal one. The resolution has to be real, made in time, and within the deed. A minute typed up in October to match the accounts is not a resolution made in June, and the ATO treats it accordingly.

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A decision made before the deadline

The resolution exists by 30 June, which is what fixes the beneficiaries' entitlements for the year.

Beneficiaries checked against the deed

A distribution to someone outside the class the deed allows is ineffective as to that share.

Figures can follow later

A resolution expressed in percentages or a formula is real in June and quantified when the accounts are done.

What is a trust distribution resolution, and why is the date absolute?

A distribution resolution is the trustee’s decision about who receives the trust’s income for a financial year, and in what shares. It has to be made by 30 June, because that is when the beneficiaries’ entitlements are fixed. A beneficiary who is presently entitled at that moment is assessed on their share. If nobody is presently entitled, the trustee is assessed instead, at the top marginal rate. The accounts that quantify the amounts can be prepared later. The decision cannot.

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When does the resolution have to be made?

By 30 June, for the year that is ending. That is the date the beneficiaries’ entitlements are fixed. Minutes prepared later to match the accounts do not meet the requirement, even if they are dated June.

What happens if we miss it?

The trustee can be assessed on the trust’s income at the top marginal rate. That applies to the whole of the income for the year, not to a shortfall. For a trust that normally distributes to beneficiaries on lower rates, the difference is substantial.

How can we resolve before we know the figures?

By expressing the entitlements as percentages or as a formula rather than as dollar amounts. The decision about who benefits and in what share is what must be made in June. The accounts can quantify it afterwards.

What if past years were done late?

Tell us, because the position differs year by year. Some exposure is live and some is out of time. There may be steps worth taking, and there may not, but the first thing is to know which years are affected rather than assuming.

Get the resolutions done before the year ends

Send us the deed and last year’s resolution. We will prepare this year’s before 30 June, with the beneficiary class checked.

A resolution made in October is not a resolution made in June

Your trust makes distributions every year, and the paperwork usually follows the accounts. That order is the wrong way round. The decision has to exist by 30 June even though the figures will not be known until later. If it does not, the trustee is assessed at the top rate on income that was meant to reach beneficiaries on much lower ones.

We will read the deed and confirm who sits inside the beneficiary class.
We will confirm which categories of income the trustee is permitted to stream.
We will prepare a resolution that can be made before 30 June without final figures.
We will diarise the deadline so the decision is never left until the accounts.
We will advise on your exposure where earlier resolutions were late or defective.

The accountant prepares the minutes when the accounts are done

You have a family trust and a routine that has worked for years. The accounts are finalised a few months after the end of the financial year. The distributions are worked out then and the minutes are signed to match. Nobody has raised it as a problem, because nothing has gone wrong yet. What has not been tested is whether a resolution dated June but signed in October would survive an ATO review.

What's included in your resolution service

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A review of the beneficiary class as the deed defines it.
Confirmation of the trustee's streaming powers.
A distribution resolution drafted to be made before 30 June.
A diarised reminder ahead of the end of the financial year.
Advice on prior year resolutions that were late or defective.
A record of the decision that stands up to an ATO review.

What a late or invalid resolution costs

The consequence of getting this wrong is not a penalty. It is a tax bill at the highest rate in the system.

Where no beneficiary is presently entitled to the trust’s income at the end of the year, the trustee is assessed on it. That is the top marginal rate plus the levy, applied to the whole of the income, regardless of who was eventually paid. A trust distributing to beneficiaries on lower rates can lose most of the benefit of doing so in a single year.

The other failures are quieter. A resolution that names a beneficiary outside the class the deed allows is ineffective as to that share. A resolution that distributes a category of income the deed does not recognise can be read down. A resolution that is undated, unsigned, or reconstructed later is evidence of nothing at all.

From minutes that follow the accounts to a decision made in time

We work from the deed rather than from last year’s minute. That means confirming who is actually inside the beneficiary class, and what categories of income the trustee is permitted to stream.

Then we prepare the resolution so it can be made before 30 June without the final figures. Resolutions can be expressed in percentages or as a formula, which is what lets the decision be real in June and quantified in October. We diarise it, so the year does not end with the question still open. Where past resolutions were late or defective, we tell you what the exposure is and whether anything can be done about it.

How we get the resolutions right

Read the deed, resolve before 30 June, quantify later.

Read the deed

We confirm the beneficiary class and the categories of income the trustee is allowed to stream.

Resolve before June

We prepare a resolution that can be validly made before the year ends, without the final figures.

Quantify afterwards

The accounts fill in the amounts later, against a decision that was already properly made.

Resolutions made in time and inside the deed

The trust resolution is the piece of compliance that feels like paperwork and behaves like a deadline. It is easy to leave to the accountant and easy to leave too late.

Two of our lawyers are full members of the Society of Trust and Estate Practitioners. One of our lawyers is a Chartered Tax Advisor with The Tax Institute and has held that credential for 25 years. We prepare trust distribution resolutions against the deed rather than against last year’s minute. We also advise on the exposure where earlier years were done late. We would rather spend an hour on the beneficiary class in May than explain a top-rate assessment in November.

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Get this year's resolution done in time

Send us the trust deed and last year’s resolution. We will check the beneficiary class and have this year’s resolution ready to sign before 30 June.

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