If you operate a discretionary trust, it’s essential that a valid Trust Distribution Minute is prepared and signed on or before 30 June 2025. This isn’t just an administrative task — it’s a critical legal requirement with serious tax consequences if overlooked.
What Is a Trust Distribution Minute?
A Trust Distribution Minute is a formal record (often called a resolution) that states how the trustee intends to distribute the trust’s income to its beneficiaries for a particular financial year. It must be documented before 30 June, even if the exact dollar amounts aren’t finalised.
It typically includes:
– The names of the beneficiaries
– The amounts or percentages of income allocated to each
– Confirmation that the trustee has exercised discretion in making the distribution
– The date of the resolution
What Happens If You Miss the Deadline?
If a distribution resolution is not made and signed by 30 June, the default position under tax law is that the trustee pays tax on the trust income at 47%, regardless of the individual tax circumstances of beneficiaries. This is not a penalty — it’s simply how the tax rules operate in the absence of a valid income distribution.
In other words: if there’s no valid resolution, there’s no valid distribution — and the ATO will treat the trustee as having retained the income, taxing it at the highest marginal rate.
The Lewski v Commissioner of Taxation Case (2017)
A landmark case that reinforces this principle is Lewski v Commissioner of Taxation [2017] FCAFC 145. In this case, the Federal Court examined whether a trust distribution resolution made after the end of the financial year was valid for tax purposes.
The background:
– The trustee attempted to backdate a resolution distributing income from the 2013 financial year.
– The ATO disallowed the resolution on the basis that it was made after 30 June 2013, and therefore had no effect.
– The trustee argued that a prior intention existed and the resolution reflected what they had intended all along.
The outcome:
The court ruled in favour of the Commissioner. It found that trustees must exercise their discretion to distribute income no later than 30 June, and that resolutions made after that date cannot be backdated or deemed valid, even if the trustee always intended to distribute income.
This case highlighted the importance of timing and proper documentation — intentions alone are not enough. If the resolution is not documented properly and in time, the ATO will disregard it.
Benefits of Getting the Minute Right
✔️ Tax Efficiency: Allows income to be distributed to beneficiaries in the most tax-effective way — for example, allocating to adult children, a company, or a low-income family member.
✔️ ATO Compliance: Ensures that your trust remains compliant and avoids scrutiny or disputes.
✔️ Flexibility: Provides flexibility to use income streaming for franked dividends, capital gains, or other categories (if allowed under the deed).
✔️ Protection: Shields the trustee from being taxed at 47% unnecessarily.
What You Should Do Now
1. Review your trust deed – make sure it allows for discretionary income allocation and streaming if relevant.
2. Work with your accountant – start tax planning well before 30 June to allow time for review and decision-making.
3. Sign your distribution minute – ensure it is dated no later than 30 June 2025. Electronic signing is acceptable if a proper audit trail is maintained.
4. Keep the resolution on file – it must be available for review by the ATO if requested.
Even if your financial statements aren’t finalised by June, you can still use a reasonable estimate of income when making the resolution.
How We Can Help
At VI Partners, we help our trust clients each year by estimating income in advance of 30 June, modelling tax-effective distribution options, and preparing valid resolutions that comply with ATO requirements. Whether you’re an existing client or considering our services, we aim to ensure compliance, maximise tax outcomes, and give you peace of mind at year-end.
