Guide · Updated 17 August 2026
Trust distributions: the 30 June deadline that costs the most
Why a resolution dated 1 July is worse than useless, how streaming works, and where the ATO now draws the line on distributions to adult children.
When must trust distributions be resolved?
Before 30 June of the income year — not before lodgement, and not when the accounts are prepared months later. If no valid resolution exists by 30 June, the deed's default provisions apply, or the trustee is assessed at the top marginal rate on the income. Resolutions should be in writing, dated, identify the beneficiaries and the amounts or proportions, and be signed by the trustee. Where capital gains or franked dividends are being streamed to particular beneficiaries, the deed must permit it and the resolution must say so specifically.
- Resolution required before 30 June
- Trustee taxed at top rate if missed
- Streaming needs deed authority and specific wording
- Section 100A applies to some family arrangements
What a valid resolution looks like
In writing, dated on or before 30 June, made by the trustee (or all trustees), identifying each beneficiary and their entitlement as an amount or a proportion. Proportions are usually safer than dollar figures, because the final income figure isn't known in June — a resolution distributing "$100,000 to A and the balance to B" can misfire badly if income lands lower than expected.
The beneficiary must also be within the class defined by the deed. Distributing to someone who isn't a beneficiary is ineffective no matter how carefully it's documented.
Streaming capital gains and franked dividends
Capital gains and franked dividends can be streamed to specific beneficiaries — so a beneficiary with capital losses can absorb the gain, or a low-rate beneficiary can use franking credits — but only where the deed authorises it and the resolution specifically records it. Streaming decided after year end, or implied from the accounts, doesn't work.
Section 100A and distributions to adult children
The ATO's position, following recent guidance and litigation, targets arrangements where a beneficiary is made presently entitled to income but someone else enjoys the benefit — classically, a distribution to an adult child that is immediately "lent back" to the parents or applied to family expenses. Where section 100A applies, the trustee is taxed at the top rate and the ordinary two- and four-year amendment limits don't protect you.
The practical implications: distributions should be real, the beneficiary should actually receive or control the funds, and where the money stays in the business the arrangement should be documented on commercial terms. If a distribution exists only on paper, expect it to be challenged.
Frequently asked questions
Can I backdate a resolution?
No — and doing so is a serious matter, not a paperwork shortcut. Resolutions are routinely tested against the accountant's file, email trails and preparation dates. Diarise it instead: we prepare resolutions for every trust client in May and June.
Can I distribute to a company beneficiary?
Yes, if the deed permits it, and it caps tax on that share at the company rate. But the resulting unpaid present entitlement needs managing — leave it unpaid and used by shareholders, and Division 7A consequences can follow.
What if the trust made a loss?
Losses stay in the trust and are carried forward — they can't be distributed to beneficiaries. Trust loss rules also impose tests that can restrict using those losses in later years, which is one of the real disadvantages of trusts against companies.
Do I need to distribute all of the income?
Practically, yes. Any income not effectively distributed is generally assessed to the trustee at the top marginal rate, so undistributed income is the most expensive money in the structure.
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