Your checklist for making beneficiaries entitled to trust income

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In light of the recent changes to interpretations of trust law, it is important to understand all the issues you need to consider when making trust distributions, which firstly involves ensuring that beneficiaries are actually entitled.

The ATO has released a checklist for trustees who wish to make beneficiaries presently entitled to trust income by way of making resolutions. It suggests trustees ask themselves the following questions:

  • Do you have a complete copy of the trust deed?

  • Who can you appoint income or capital to?

  • Has the trust vested?

  • Is there a family trust election in force for the trust?

  • When do you have to make resolutions?

  • Is there a standard format for a resolution?

  • Does a resolution have to be in writing?

  • Is the wording of your resolution clear and unambiguous?

  • Is the entitlement vested?

  • Can the entitlement be taken away?

  • Variation of income resolutions?

  • How should you calculate and report the income of the trust?

  • Are you ‘streaming’ capital gains or franked distributions?

  • Are you seeking to ‘stream’ other types of income?

  • Will records created after 30 June be accepted as evidence of the making of the resolution by that date?

  • Do you have to prepare the trust accounts by 30 June to make beneficiaries presently entitled to trust income?

  • What happens if you make a resolution after 30 June?

  • Have all entitled beneficiaries quoted their tax file number (TFN) to you?

There is a lot to consider and if you are unsure about any of these issues, contact us and we’ll ensure you stay fully compliant.

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