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Discretionary Trusts (sometimes referred to as Family Trusts) are a popular structure used by many of our clients.

An important annual task when operating a discretionary trust is to prepare a Trustee Resolution to describe the manner in which the net income of the trust will be distributed to beneficiaries. To be effective for income tax purposes, the Australian Taxation Office (ATO) require that resolutions be made by 30 June (or any earlier date as prescribed by the Trust Deed). This is an area of continuing focus by the ATO.

Whether the resolution must be recorded in writing will depend on the terms of your trust deed. However, a written record will provide better evidence of the resolution and avoid a later dispute, for example with the ATO or with relevant beneficiaries, as to whether any resolution was made. A written record will be essential if you want to effectively stream capital gains or franked distributions for tax purposes.

If we will be preparing financial statements and tax returns for a trust that you operate, we will review your circumstances over the next month. In some cases, we will prepare Trustee Resolutions for you to review and execute before the end of the financial year. In other cases, we will formalise the resolutions you have made at a later point.

If you have any questions, please don’t hesitate to contact your PT Partners advisor.

Darren Hagarty is a Director of PT Partners.