8 Essential Trust Compliance Activities to Complete Before EOFY

If you use trusts as part of your business or personal investment structure, it’s crucial to address several key compliance activities as the 2024 financial year approaches. Our experts have pinpointed eight essential areas to ensure your trust operates effectively and in compliance with regulations.

1. Review the Trust Deed

The trust deed is the foundational document of the trust and should be reviewed regularly. Focus on specific definitions and the trustee’s powers, especially concerning the distribution of trust income and capital. Ensure it aligns with current tax laws and the trust’s operational goals.

2. Prepare a Valid Income Distribution Resolution on Time

Trustees must make a distribution resolution by the end of the financial year. This resolution, typically in writing, should detail the beneficiaries and the specifics of the distributions. Timely preparation of this document is crucial to avoid complications and ensure compliance.

3. Account for Streaming of Capital Gains and Franked Dividends

If the trust deed permits, capital gains and franked dividends can be streamed to specific beneficiaries. This means that these types of income can be separately accounted for and distributed. Be aware, however, that streaming other income types, like foreign income, does not transfer attached tax attributes (e.g., foreign income tax offsets) to specific beneficiaries.

4. Carefully Plan for Corporate Beneficiaries

When distributions are made to corporate beneficiaries, careful planning is required, especially if the distribution will remain unpaid. Division 7A may apply, which could treat the unpaid trust entitlement as a loan from the company, potentially resulting in the treatment of the amount as an unfranked dividend.

5. Consider Making Family Trust Elections

To claim carried forward tax losses, bad debt deductions, or pass on franking credits, a Family Trust Election (FTE) might be necessary. An FTE identifies the trust’s family group, allowing certain tax benefits. However, distributing to individuals or entities outside this family group can have adverse tax consequences.

6. Assess if Section 100A Applies

Section 100A may apply if a beneficiary agrees to provide the benefit of a distribution to someone else. In such cases, the trustee could be taxed on the distribution at a rate of 45%. Review recent ATO guidance to ensure compliance with these rules.

7. Consider TFN Reporting for Closely Held Trusts

Trustees of resident discretionary trusts, family trusts, and other closely held trusts must obtain TFNs from beneficiaries and report any new beneficiaries’ TFNs to the ATO. If a beneficiary does not provide their TFN, the trustee must withhold tax and remit it to the ATO, filing an Annual TFN withholding report by 30 September 2024.

8. Familiarise Yourself with Changes to Income Tax Return Disclosures

The ATO has introduced additional disclosures related to trust distributions made to beneficiaries. Ensure you are aware of these changes and prepare the necessary information for your income tax return to maintain compliance.

By addressing these key activities, you can ensure your trust is compliant and optimized for the end of the financial year. For tailored advice and assistance, consider consulting with a tax professional or trust advisor.

Ensure your trust is compliant and operating efficiently as the financial year ends. For expert guidance and support, contact our team of trusted advisors today. Don’t wait—secure your financial future now!

For tailored advice and assistance with your trust compliance activities, contact us at 1300 952 286, email us at info@boanco.com.au, or visit www.boanco.com.au. Our team of experts is ready to help you navigate these complex requirements and ensure your trust operates smoothly.

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