Each year the Trustee of a Family Trust (also known as a Discretionary Trust) must make a resolution to distribute the income of the trust before 30 June
Trust Distribution Resolutions are as much about delivering a service as educating your clients about why they are so important. Ideally, early Tax Planning with your client would include decisions on how distributions are going to be done in advance.
The ChangeGPS Trust Distribution Resolution System
Use our system to:
- Educate - inform your clients with our Client VPP Emails
- Engage - Use ChangeGPS Engage or other solutions to send an Engagement letter and also invoice client in advance
- Deliver - Create and send Resolutions using the ChangeGPS Trust Distributions App or use the client letter templates to de-risk your practice when this service is not required or the client rejects your offer to assist.
- Access the Trust client's contact details directly from XPM or quickly enter the details
- The Trust Distribution Resolution includes a cover letter (optionally customise the letter template to suit your practice) and the detailed Trustee Resolution.
- Send for digital signatures direct to client with a FuseSign integration to ChangeGPS
- Track the status of Trust Distribution Resolutions with Sent Documents
The Trust Distribution App is available as part of the Core Lite and Pro subscriptions. Here's how they compare
Importantly, ensure you have a complete copy of the trust deed
Make sure you have a complete copy of the trust deed, including any amendments. You need to be sure that any resolution you make to distribute the trust's income or capital is consistent with the terms of the deed.
Be sure you understand how the income of the trust is calculated and that the resolution reflects this. For example - if the deed defines the income of the trust to be an amount equal to the trust's net (taxable) income, the resolution should not seek to appoint accounting income.
If the trust deed equates the trust's income with its net (taxable) income, you should note the ATO's view that income cannot generally include notional amounts such as franking credits.
The income of the trust needs to be reported in the trust tax return, along with each beneficiary's share of that income.
What if Trust Distribution Resolutions are not done?
If no Trust Distribution Resolution is done, the Australian Taxation Office (ATO) may assess the Trustee of the Trust on the annual trust income at the highest marginal tax rate of 47%, instead of the intended beneficiaries being taxed.
Check the ATO Trustee Resolution Checklist
You need to ensure resolutions meet the requirements explained on the ATO checklist. If a resolution is not effective, other beneficiaries or Trustees may instead be assessed on the relevant share of the trust's net (taxable) income.
To learn more check out the ChangeGPS Trust Distribution Masterclass