All trusts before the end of a financial year at 30 June must make a resolution which outlines how the income of a trust will be distributed among beneficiaries for that given year. When this resolution is passed by the trustee, it effectively establishes the entitlement to trust income which is a legal and technical term used for who gets what and how much. It is extremely important that this resolution is made as if entitlement to trust income cannot be established, the trust is at risk of income being taxed in the hands of the trustee at the top marginal tax rate of 49%.
We will prepare these documents for all our trust clients and send them out during the month of June. Trust distribution resolutions need to be in place and signed by the trustee before 30 June to avoid administrative penalty and the possibility of the ATO rendering any resolution made after this date void.