A valid resolution relating to the distribution of income needs to be made by 30 June to avoid unintended consequences. Such consequences can include the default beneficiary becoming ‘presently entitled’ to the income of the trust or the Trustee being taxed at the top marginal rate.
Tax file number (TFN) reporting
Trustees must withhold tax at the top marginal rate plus Medicare from payments to beneficiaries of closely held trusts (including most family trusts) who do not disclose their TFN to the Trustee. Where the beneficiary does disclose their TFN to the Trustee, the Trustee must lodge a TFN report with the ATO no later than the last day of the month following the end of the quarter in which the TFN was first disclosed.
Tax-free distributions to minors
The effective tax-free threshold for minors is a mere $416 in 2013/14. Distributions of amounts greater than $416 will taxed at the top marginal tax rate.
Family trust elections
Under certain circumstances, Trustees may wish to make a ‘Family Trust Election’. Broadly, by making the election you irrevocably give up the discretion to distribute income to non-family members and in return, you gain easier access to carry forward trust losses and the right to pass imputation credits to beneficiaries.
Appointor & estate planning
The ‘Appointor’ is the person who has the right to appoint or remove the trustee which makes them the most powerful person in a trust. Whilst most would appreciate that the assets of a trust are not theirs to bequeath, some don’t think about the control of the trust after their death and what that means for the people they intended to look after. If you have a discretionary trust and you are not sure who the Appointor will be upon your death, or you want to have another think about things, please contact our office on 1300 656 141 to arrange a review of your will.
Review your Deed
With trust law constantly evolving, it pays to keep your Deed up to date. If your Deed has not been reviewed in the past 3 years, it may be rendered ineffective. Please contact our office on 1300 656 141 to arrange a review.
TIPS FROM THE TEAM
- The term ‘Family Trust’ is often used interchangeably for ‘Discretionary Trust’. In truth though, not all discretionary trusts are family trusts.
- Do you have a discretionary trust? BridgePoint Group will be contacting the Trustee of all discretionary trusts prior to 30 June and working with you to draft a valid distribution minute/resolution.
- New trusts or trusts that will distribute to a new beneficiary this year need to act before 31 July 2014 with respect to TFN reporting.
- Did you know that upon reaching the age of 18 your child can legally claim any amount notionally ‘distributed’ to them but not received nor applied for their benefit? Ask us for more information on this.
FOR MORE ABOUT FAMILY TRUSTS PLEASE CONTACT OUR OFFICE ON 1300 656 141