If you have a trust (discretionary/family or unit trust with special units), your annual trust distribution minutes must be prepared and signed before 30 June.
Each year, the trustee must decide how the trust’s income will be distributed between beneficiaries in accordance with the trust deed. That decision needs to be documented in writing before the end of the financial year. If it is not, the trust may be taxed at the top marginal tax rate.
Distribution minutes are an important part of managing a trust. They record who is entitled to the trust’s income for the year and help ensure the trust remains compliant with its legal and tax obligations. Beneficiaries may include individuals such as family members, or other entities such as companies or trusts, depending on the terms of the trust deed.
The trustee’s decision must be made and documented before 30 June each year. Even if the trust’s final income is not known until the very end of the month, the distribution minutes still need to be prepared in time so the allocation of income is valid.
There are generally different ways trust income can be allocated, including by percentage or by specific amounts, depending on what is appropriate for your situation.
If a valid distribution resolution is not in place by 30 June, the ATO may treat the trust as having no effective distribution for the year. Depending on the terms of the deed, this may mean that the income is taxed on the default beneficiaries in equal proportion, or the trustee being taxed on the income at the highest marginal tax rate.
If you have not yet attended to your trust distribution minutes for this financial year, we encourage you to do so as soon as possible. Leaving this until the last minute can create unnecessary pressure and may limit your options.
If you need assistance preparing your trust distribution minutes, please contact your advisor so we can help ensure everything is completed correctly and on time.