22 May 2023

Expert assistance for discretionary trusts: annual distribution minutes made easier

Unlock the benefits of discretionary trusts while navigating the technical complexities effortlessly with our professional accounting and advisory services. We have experience maximising asset protection and delivering on tax planning strategies for business owners and individuals.

Understanding annual distribution minutes:


Before 30 June each year, it’s crucial for a discretionary trust to allocate the income among beneficiaries, which may include yourself, your spouse, children, or related parties. This decision is documented in a signed distribution minute, fulfilling trust law requirements and serving as proof of the decision’s timing. However, one challenge is that the trust’s total income for the year may not be known until after 30 June, making the decision more complex.


Is there consequences of delaying?


Failure to prepare the distribution minutes or prove the decision’s timing to the ATO can result in the trust being taxed at the highest marginal tax rate, including Medicare levy. While a distribution decision may have been made before 30 June, it is crucial to have clear, signed minutes to avoid unnecessary disputes with the ATO. The ATO rigorously enforces compliance with the rules governing discretionary trusts and imposes additional taxes and penalties for non-compliance. It is essential to meet the requirements and maintain clear records to avoid complications.


How can we help you? 


We can mange the drafting of your distribution minutes according to your preferences. Our team will review your trust deed and assess your income to ensure compliance. As the trustee, your role involves reviewing the minutes, confirming the income distribution, signing and returning the document to us. 


What is income streaming? 


Depending on your trust deed provisions, you may have the ability to stream specific types of income, such as capital gains and dividends, separately from other income. However, other types of income will fall under the “other income” category and cannot be separately allocated.


How often do we need to this? 


Preparing distribution minutes annually is a mandatory requirement. Even if you believe there is no income to distribute in a particular year, it’s crucial to document the decision, as circumstances may change in the future.

Let’s chat if you would like help in navigating the complexities of discretionary trusts, to ensure correct compliance and optimal outcomes. Together, we can safeguard your assets and minimise tax burdens with more confidence.