Family Trust Distributions

In the 2017/18 year, minors (under 18 at 30 June) can receive investment income (including trust distributions) of up to $416 without paying tax. Any income earned above this amount is taxed at penalty rates.

Income received by a family trust should be allocated amongst the various beneficiaries by 30 June each year and documented as a resolution. The resolution should be made by 30 June 2018 to avoid any later questioning by the ATO as to whether the income was properly allocated by this date.

The exact requirements for allocating trust income are set out in the trust deed, and as each trust deed is different, it is vital that trustees are aware of the terms applying to that particular trust.

Failure to follow the terms of the trust deed and to allocate the relevant income by 30 June may result in the trustee paying tax on the income of the trust at the top marginal tax rate of 47%.

Note that additional rules apply to the ‘streaming’ of capital gains and franked dividends received by family trusts to particular beneficiaries. If you choose to stream it is necessary that sufficient streaming provisions are included in the family trust deed.

Talk to the team at The Money Edge if you would like to better understand the provisions of your family trust deed or calculate your family trust distributions.

The Money Edge | Bundaberg