Trust distribution resolutions: why 30 June is a hard deadline

30 June is not a lodgment date. It cannot be extended and there is no discretion in it. If the trustee of a discretionary trust has not made a valid resolution by then, the tax outcome for the year is decided by the deed or by section 99A, not by you.

The Australian Taxation Office's checklist for trustee resolutions states the rule in one line. A resolution appointing trust income to beneficiaries "will only be effective for determining who is assessed on the trust's net (taxable) income if it is made by the end of the income year (30 June)".

Most trustees know the date. What catches them is everything that has to be true before the resolution does any work.

Read the deed first, because it can move the deadline

30 June is the outer limit. It is not necessarily your date. Some deeds require the resolution earlier, and 28 June is common. The ATO's position is that you comply with the deed: if it says 28 June, that is your deadline.

Three other things in the deed decide whether a resolution achieves anything at all.

• The class of beneficiaries. Appoint income to someone outside the class, or to someone the deed excludes, and the appointment fails. Many deeds exclude the trustee itself. The income then falls to the default beneficiaries, or to the trustee.
• Whether the trust has vested. After the vesting date, entitlements are already fixed. A later appointment inconsistent with them does nothing.
• Whether a family trust election is in force. Distribute outside the specified individual's family group and the trustee picks up family trust distribution tax. The beneficiary who would otherwise have been assessed is not assessed at all.

You need a complete copy of the deed, including every amendment and every change of trustee. If you cannot produce one, that is the first job, not the last, and it belongs with the trust's accounting records rather than in a drawer.

What happens when 30 June passes without a valid resolution

There are two outcomes, and the deed decides which.

If the deed has a default beneficiary clause, the income falls to the default beneficiary. That is usually not a disaster. It is rarely the split you would have chosen, and it cannot be undone after 30 June.

If there is no default beneficiary, or the clause does not reach the income in question, the trustee is assessed under section 99A of the *Income Tax Assessment Act 1936*. The ATO's checklist says the trustee is then taxed at the top marginal rate. For the 2024-25 year that is 45 cents in the dollar, applied to the whole amount. No tax-free threshold. No lower brackets.

A worked example

Take the Harrington Family Trust, which runs a trades business at Robina. This is an example, not a client. Its income for the year ending 30 June 2025 is $260,000, and two adult beneficiaries have no other income.

With a valid resolution splitting the income $130,000 each. Each beneficiary pays $29,788 in income tax plus $2,600 Medicare levy, so $32,388 each. Across both, $64,776.

With no valid resolution and no default beneficiary. The trustee is assessed on the full $260,000 at 45%, so $117,000.

The difference is $52,224. It turns on a document that takes twenty minutes to prepare. That is why the trust resolution is a fixed June job in our taxation and compliance work, never an August one.

Streaming capital gains and franked dividends runs on two different clocks

Only two things can be streamed: franked distributions and capital gains. Everything else is allocated proportionately. You cannot give one beneficiary the foreign income and another the trading profit, no matter what the resolution says.

For the two that can be streamed, the recording deadlines differ.

• Franked distributions: 30 June. The beneficiary's entitlement must be recorded in writing, in its character as a franked distribution, in the records of the trust by 30 June.
• Capital gains: 31 August. You have two months after year end to record a specific entitlement to a capital gain.

The 31 August date is narrower than it looks. If a capital gain forms part of the income of the trust estate, and a beneficiary was already presently entitled to that income at 30 June, the chance is gone. A default beneficiary counts for this purpose. You cannot make someone specifically entitled to an amount that has already been dealt with.

There is a second trap on discounted gains. If your deed equates trust income with taxable income, a resolution appointing the income attributable to a discounted capital gain only creates an entitlement to half the money. The discounted half is not income of the trust. To create an entitlement to all of the financial benefits referable to the gain, the trustee also has to appoint the trust capital attributable to the discount component.

Present entitlement is not the same as paying the money

This is where most of the risk sits.

A beneficiary who is presently entitled at 30 June is assessed on their share of the trust's net income whether or not a dollar moves. The entitlement has to be vested and indefeasible. It cannot be contingent on a future event, and it cannot be capable of being taken away.

So the tax follows the resolution and the cash follows a separate decision. Leaving the money in the trust is common and often legitimate, because it is working capital. But an unpaid entitlement is a live obligation of the trustee, and it draws attention from two directions.

Where the beneficiary is a private company, the ATO's view in TD 2022/11 is that leaving the entitlement unpaid can itself be a loan. "Financial accommodation" in section 109D(3) is wide enough, on that view, to cover a company that knows it can demand payment and does not. The company is then taken to lend to the trustee and Division 7A applies from that point.

Treat this as unsettled, because it is. In February 2025 the Full Federal Court decided *Commissioner of Taxation v Bendel* against the Commissioner. It held that section 109D(3) requires an obligation to repay, not merely an obligation to pay, and that an unpaid present entitlement was therefore not a loan. The Commissioner has filed a special leave application with the High Court. In its interim decision impact statement the ATO says that until the appeal process is finalised it does not intend to revise TD 2022/11, and is administering the law in accordance with it.

While the appeal is on foot, the safe course has not changed. If a corporate beneficiary's entitlement is going to stay in the trust, put it on Division 7A complying loan terms. The benchmark interest rate for the year ending 30 June 2025 is 8.77%, the maximum term is seven years unsecured, and minimum yearly repayments start the following year.

Section 100A sits behind all of it

Section 100A is an anti-avoidance rule that has been in the Act since 1979. Broadly, it applies where a beneficiary is made presently entitled to trust income, someone other than that beneficiary gets the benefit, and at least one party entered the arrangement for a purpose of paying less tax. Its reach is long: the ATO's compliance guideline still deals expressly with arrangements from income years ended before 1 July 2014.

The exception carrying the weight is "ordinary family or commercial dealing". The ATO's PCG 2022/2 sorts arrangements into three zones. A white zone for those older years, which it will not devote new compliance resources to except in limited cases. A green zone it will not examine beyond confirming the facts. A red zone it treats as a priority.

For the corporate beneficiary case, the green zone requires the retained funds to be used in the trustee's business or investment assets, and, where the beneficiary is a company or a trust, that the entitlement is made available by way of a loan on commercial terms. The guideline defines commercial terms by reference to Division 7A: interest at least the benchmark rate, a term no longer than seven years, and repayments no more favourable than the minimum yearly repayment formula.

Retain a corporate beneficiary's funds without converting the entitlement to a loan at least that commercial, and the arrangement falls outside the green zone. Outside the green zone is not the same as red. It means the ATO may want to understand what you have done.

What to do before 30 June

• Get the complete deed, with amendments, and confirm the date the deed itself requires.
• Confirm each intended beneficiary is inside the class, not excluded, and inside the family group if an election is in force.
• Estimate the year's income now. You do not need finished accounts: a resolution is effective if it prescribes a clear methodology, such as a percentage of the income whatever that turns out to be.
• Put the resolution in writing and sign it before 30 June. Deal with franked distributions expressly in the same document.
• Decide separately what happens to the cash, and document that decision too.

The ATO will accept records created after 30 June as evidence of a resolution actually made by 30 June. A signed note dated 29 June, typed up on 15 July, is fine. What it will not accept is a resolution made in September and dated June.

If the trust sits inside a wider structure, the annual resolution is a good prompt to check the structure still does what it was set up to do. That is a conversation for our business advisory team, and it costs far less in May than in July.