Trust distributions continue to be an area the ATO focuses on. With this in mind it is more important than ever to ensure that your trust distributions are compliant and effective.
1. Trust distribution minutes
Ensure you speak to your tax advisor to ensure your trust distribution resolutions are in place by 30 June 2019.
Be aware that if you are planning to distribute to any new beneficiaries (e.g adult children, corporate beneficiaries) for the 2019 year or beyond you need to ensure a Tax File Number (TFN) report has been lodged notifying the ATO of the beneficiaries’ TFN before the end of the financial year if not already done.
This is to notify the ATO of any new beneficiaries as they have an obligation to provide their TFN to avoid having TFN withholding applied to payments at a hefty rate of 47%.
2. Division 7A Loans – Trust distributing to a company
When deciding to distribute income from a Trust to a Company during the 2019 financial year to benefit from a lower company tax rate, ensure you have considered Division 7A consequences.
Where a Trust distributes income to a Company, the Unpaid Present Entitlement (UPE) may result in a deemed dividend if the UPE is not repaid by the lodgement due date of the Trust’s 2020 Income Tax Return or placed on a complying Division 7A loan agreement or Sub Trust Agreement.
If you’re unsure, please consult your accountant / tax advisor. Your circumstances are unique and you need to ensure that you have the right set up, the right systems in place throughout the year and the right advise.
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