Taxation and Revenue Alert: Trust distributions must be made by end of June - 24 May 2012

Earlier this month, the Commissioner of Taxation confirmed that trust distributions for the FY12 income year need to be made on or before 30 June 2012. This announcement follows a number of legal developments related to the distribution of trust income.

Here, special counsel Justin Byrne outlines these developments and explains how trust distributions can be made even when the amount of income has not yet been determined.

Key points

  • Following two key changes to the process surrounding trust distributions, the Commissioner has announced he will be requesting further information from selected taxpayers after 30 June.
  • Even if your trust's income has not yet been determined, you can still make distributions by the deadline of 30 June using one of a number of different methods.

Changes in trust distribution assessment

The Commissioner's practice of allowing two months after 30 June in which to make resolutions has been withdrawn. In addition, there have been changes to the legislation requiring specific entitlements to be "recorded in its character in the accounts" of the trust.

The Commissioner has also announced that, as part of his compliance program, he will request copies of the trust distribution minutes, together with a copy of the trust deed, from selected taxpayers within the first few weeks following 30 June. Accordingly, taxpayers should be ready to provide this information if requested.

Making trust distributions when income is unknown

There are a number of ways in which distributions can be made at or before the 30 June deadline, even if the exact amount of trust income has not yet been determined.

One way is to use percentages - for example, "Mr X is entitled to that amount which equates to 50 percent of the trust income, and Mrs X is entitled to that amount which equates to the balance 50 percent of trust income."

Another way is to use fixed amounts, with one or more beneficiaries being entitled to the balance of the income - for example, "Mr X is entitled to $100, Mrs X $200 and the balance to ABC Pty Ltd."

Neither of these methods will be as accurate as a resolution where the exact amount of trust income is known, but they should provide a fairly close approximation and will satisfy the Commissioner.

HopgoodGanim regularly assists accountants with trust queries, including settlement of trusts, amendments to trust deeds and drafting trustee resolutions. For more information on trust distributions or to discuss your personal trust needs and requirements, please contact HopgoodGanim's Taxation and Revenue team.