Your trust’s distributable income is the net income for tax purposes which beneficiaries will be entitled to receive, in accordance with the trust deed, within the financial year. The allocation of your trust’s net income for the current financial year needs to be determined and trust minutes are used to inform the ATO of the allocation.
ATO legislation stipulates that this distributable income be calculated prior to 30 June, and should the ATO request verification, signed trust minutes of the trustee’s resolution in this regard are required. In abiding by the ATO legislation, your trust distribution can avoid being taxed at the highest marginal tax rate (47% as at 2018).
Valid trust distribution minutes must provide clear methodology of the determination of each beneficiary’s entitlement. Referencing your trust deed will help you with entitlement rights of receiving parties.
In order to prepare your trust minutes, we recommend you seek the guidance of a professional accountant.
At YML Group we work closely with our clients to assist them to assemble the necessary documentation for the ATO.
Your options are:
- Allow us to prepare draft interim financial statements to 31 March 2018 for your trust and then use these figures to estimate final quarter profit in order to calculate your trust distribution percentages. We will prepare your trust distribution minutes for you to sign.
- Allow us to use your financial estimates to prepare your trust distribution minutes for you to sign.
- Manage your own estimate calculations and prepare your own trust distribution minutes for the ATO. We do not recommend this option.
Upon the resolution of your trust’s net (distributable) income for financial year ending 2018, written minutes of this resolution will ensure that the ATO will have the information available in regards to the specified beneficiaries’ entitlements, ensuring trust income is not automatically taxed at the top marginal rate after 30 June 2018.
Arrange a trustee meeting with YML Group, without delay, to discuss trust resolutions for net income distribution, particularly if there are franked dividends and capital gains to be considered.
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your trust distribution. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.