Importance of preparing a Trust Distribution Minute

As the end of financial year approaches, it's important for trust holders to consider their options for distributing income and avoiding any extra tax. A Trust Distribution Minute is one of the tools that can be used to achieve this. Here's what you need to know about Trust Distribution Minute's and how they can help you avoid extra tax.

What is a Trust Distribution Minute?

A Trust Distribution Minute is a document that sets out the distribution of trust assets among beneficiaries. It outlines the distribution of income and capital and specifies how much each beneficiary will receive. The TDR must be signed by the trustee and should be dated before the end of the financial year.

Why is a Trust Distribution Minute important for avoiding extra tax?

The main advantage of a Trust Distribution Minute is that it allows trust holders to distribute trust income to beneficiaries in a tax-effective way. By distributing the trust's income to beneficiaries before the end of the financial year, the trust can reduce its taxable income and avoid paying additional tax. This can result in significant tax savings for the trust and its beneficiaries.

It is important to note that a Trust Distribution Minute must be prepared and signed before the end of the financial year to be effective for tax purposes. Therefore, it's important to act quickly to avoid missing this deadline.

If a Trustee fails to make a resolution to distribute the income of the Trust before the end of the financial year, the Trustee may be assessed by the Australian Taxation Office (ATO) on the Trust income at the highest marginal tax rate of 47%, rather than the intended beneficiary(s) being taxed at generally much lower rates.

With only a couple of months left until the end of the financial year, now is the time to act to ensure you avoid any extra tax.

Please contact our office for more information or to ensure your resolution is prepared on time.