Distributing trust income? Make your trustee resolution by 30 June

By Justin Inskip, Director, Westlawn Business Services

For trusts distributing income, trustee resolutions must be made by 30 June 2013.  According to the ATO, informal written records of a trustee resolution made before 30 June (which are later documented in a formal minute or resolution) will be acceptable evidence of a resolution being made before 30 June.

Generally, if the trust deed allows, an oral resolution will be effective to distribute the income of the trust before 30 June where the resolution is later recorded in writing. However, the ATO would likely challenge an oral resolution alone due to a lack of evidence that the resolution was made before 30 June.

The ATO may also challenge a resolution purported to have been made before 30 June but which includes information unlikely to have been known at the time. An example may include a resolution specifying an exact dollar amount of income.

Five tips for trustee resolutions

When making any resolution for distributing trust income, follow these 5 tips:

1. Make a resolution in writing, and where possible, have every trustee, or every director of the corporate trustee, sign the resolution by 30 June 2013.

2. Be wary of dealing with franking credit gross up amounts and non-deductible expenses.

3. Use percentages and ‘balance’ distributions to ensure all trust income and capital gains are effectively distributed by 30 June 2013.

4. Don’t make resolutions which are subject to change such as “In the event of a future amended assessment by the Commissioner of Taxation …”

5. If the trust has a discount capital gain, make sure the total gross amount (the discount and non-discount components) of the gain is distributed to the beneficiaries who are intended to be assessed on the capital gain.

If you have any questions about trust resolutions, contact your Westlawn Business Services Accountant.

Copyright © 2013


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