From the 2011/12 financial year, Trustees who distribute the income of a Trust through a resolution to beneficiaries must do so by the end of the financial year (June 30) for the resolution to be effective in determining who is to be assessed on the Trust’s income.
This is a new change to the Trust taxation laws that applies to this financial year, and future years.
If a Trustee fails to make a resolution to appoint the income of the Trust before the end of the financial year, the Trustee may be assessed by the ATO on the Trust income at the highest marginal tax rate (i.e. 45%), rather than the intended beneficiary(s).
In prior years the ATO allowed a certain amount of discretion as to when a resolution could be prepared.
However, the ATO now takes the view that following the recent decision in Colonial First State Investments v FC of T 2011 ATC 20-235, trustees must now resolve to distribute the current year’s income on or before year end to ensure the beneficiary is presently entitled to trust income.
What we are doing…
Despite the fact that preparing a trust distribution resolution before the end of the financial year can be quite complex, we need to comply with the recent changes to trust taxation laws.
The steps we need to undertake on your behalf include:
- Review of your prior year Trust Distribution Resolution
- Confirmation with you of the estimated Trust income of [ClientName] for the year ended 30 June 2012
- Review of your Trust Deed to ensure that the income definition and distribution clauses in your Trust Deed allow the proposed Trust Distribution Resolution for 30 June 2012
- Advice about the most tax effective distribution of this estimated Trust income
- Preparation of Trust Distribution Resolution and ensuring it is signed by the Trustees PRIOR to 30 June 2012
What you need to do…
In order for us to estimate your Trust’s income for 2011/12 income year, can you please send us a summary of Trust profits for the period 1 July 2011 to 30 June 2012 ASAP.
We will then review this information and provide you with a quote for our preparation of your Trust Distribution Resolution.
If you have any further queries in relation to this matter please feel free to contact me.
We look forward to hearing from you soon!