Jun 2019 2 Minutes
Trustee Resolutions need to made by 30 June
A written trustee resolution may be required because the terms of the Trust Deed often specify that the trustee must put in writing the discretion to “pay, apply or set aside” income in a particular year.
Where the trustee is a company, the Corporations Act requires certain decision making to be in writing, including the resolution to distribute income.
In addition, taxpayers have the burden of proof in relation to their tax affairs, especially in the event of a dispute with the ATO. A written record will provide better evidence of the resolution and avoid a later dispute with the ATO as to whether any distribution of income was effectively made by 30 June.
The ATO has issued a Fact Sheet clearly titled “Trustee resolutions must be made no later than 30 June”, which states:
- Trustee resolutions creating a Trust Entitlement must be made before 30 June;
- The Trust Deed may specify that resolutions must be made at an earlier date, such as 28 June (last business day of the 2019 financial year);
- Confirming the previous ATO administrative practice has ceased that allowed resolutions to be made up to two months after year end;
- If the Trust Deed does not require a resolution to be in writing, then an unwritten decision before 30 June is valid but requires sufficient documentation to discharge the onus of proof;
- Accounts do not have to be prepared at 30 June and a trustee resolution can prescribe a clear methodology (such as a percentage, fixed amount with or without a balance distribution); and
- If no beneficiary has a valid Trust Entitlement, the income and gains will be taxable to the trustee at the top marginal rate plus Medicare levy, unless a valid Default beneficiary clause is present in the Deed.
As a result, making time to ensure a considered and effective resolution is made before the end of the year will be critical to ensuring you minimise your 2019 tax position. Please contact Jane Chiang if you would like to discuss any issues with respect to the preparation of your 2019 trustee resolutions.