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.
Westlawn provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.
Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.