A family trust’s profit has been calculated and the accountant has a list of beneficiaries. That does not mean the trustee’s annual distribution work has been completed.
The trust deed, the decision actually made, the beneficiaries’ entitlements and the accounting records need to fit together. A payment from the bank account is evidence of cash moving. A journal entry records an accounting treatment. Neither automatically replaces a valid trustee decision.
The deed is the starting document
Obtain the complete trust deed, including amendments. Confirm who can benefit, how income is defined, who can exercise the trustee’s powers and what the deed says about timing and decision-making. A prior-year template may be unsuitable after a trustee change or a change in the family or business arrangements.
For a trust with a standard 30 June income year, distribution resolutions generally need to be made by 30 June of that year; a deed may require an earlier date. The ATO’s trustee resolutions checklist explains these requirements and the importance of clear wording. Special issues, including streaming capital gains and franked distributions, need separate attention.
Final accounts do not always have to be completed before a valid decision can be made. Depending on the deed, a resolution may use a sufficiently clear formula or proportion. Have the actual wording reviewed rather than assuming that any percentage written in an email will work.
Three amounts may tell different stories
Keep trust income under the deed, net taxable income and cash available for payment separate in the working papers. Differences can arise from capital items, tax adjustments, non-cash expenses and the timing of receipts and payments. The beneficiary’s tax reporting therefore needs more analysis than copying the bank transfer.
Take a simple illustration involving a beneficiary with an opening entitlement of $30,000, a further valid entitlement of $20,000 and payments of $35,000 during the year. Before other adjustments, the closing amount owing is $15,000. That arithmetic is straightforward. The supporting work is establishing what the amounts represent and whether the records reflect the legal position.
Keep a beneficiary schedule that moves from opening balance to new entitlements, payments, other separately explained transactions and closing balance. Reconcile it to the general ledger and supporting documents. Avoid putting every family transaction into a single account called “drawings”.
Follow the economic benefit
A distribution to one person with the benefit directed elsewhere can raise anti-avoidance concerns. Section 100A deals with certain reimbursement agreements; it does not follow that every unpaid entitlement or family payment is caught. The arrangement, purpose and surrounding circumstances matter. The ATO’s guidance on reimbursement agreement risks explains the issue.
Before approving a distribution, discuss who is intended to receive and use the funds. Where money will remain in the business, record what has actually been agreed and obtain advice on the consequences. A beneficiary’s tax position alone should not drive the decision while the use of funds remains unexplained.
Corporate beneficiaries, related loans and unpaid entitlements can raise further questions. These areas need advice based on current law and the particular facts, rather than a standard “bucket company” assumption copied from an old article.
After year end, establish what happened
If the relevant deadline has passed, first establish whether a decision was made on time and what evidence exists. Do not backdate a resolution to manufacture a decision that was never made. There is a meaningful difference between recording evidence of a real earlier decision and pretending that a later decision occurred earlier.
Once the accounts are finalised, ensure beneficiary statements and tax returns reflect the valid entitlements and applicable tax treatment. Check beneficiary details and relevant elections. The ATO’s Tax Time 2026 trustee update highlights current reporting and record considerations.
Keep proposed changes in their own file
As at this article’s 8 September 2026 review, the proposed 30% minimum tax on certain discretionary trusts from 1 July 2028 is not yet law. Treasury has released exposure draft material, and the ATO expressly identifies the measure’s proposed status. Read the ATO’s current legislative update before treating a headline as an operative rule.
Potential reforms may justify modelling future options. They do not justify rewriting current obligations or restructuring without checking the legal, tax, duty, finance and business consequences.
Target Advisory can help reconcile the trust accounts, prepare the tax working papers and coordinate the questions that need legal review. The practical goal is a decision that is properly made, accurately recorded and understood by the people affected.
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