The ATO’s Private Wealth Assistant Commissioner, Amy James-Velagic, shared some valuable information and insights on Family Trust Distribution Tax (FTDT) on 28 August 2025. She warned of growing risks with FTDT due to poor record keeping and long-term impacts of trust elections. Updated guidance and online tools are now available to help trustees and advisers manage compliance and avoid costly mistakes.

Spotlight on Assistant Commissioner Amy James-Velagic

Assistant Commissioner Amy James-Velagic has highlighted the ongoing risks associated with Family Trust Distribution Tax (FTDT) as part of the ATO’s Trusts Program focus for 2025–26. She explained that issues such as poor record keeping, inadequate succession planning, and a lack of awareness about the long-term consequences of family trust (FTEs) and interposed entity elections (IEEs) are increasing FTDT liabilities.

To support taxpayers, the ATO has updated its guidance materials, improved its online services, and clarified requirements for signing elections. Agents can now view all elections lodged since 2020 through Online services for agents, helping to reduce compliance risks.

The ATO has no powers to ignore the application of FTDT. There’s no discretion to determine that FTDT not be applied where the taxpayer or adviser claims the FTDT liability arose because of a mistake or ‘no tax mischief’. Because FTDT liability automatically arises when a distribution is made outside the family group, we can’t limit our review and collection of FTDT liabilities to the general 2 or 4 year period of review applying to income tax. We’re required by law to collect all payable tax liabilities owed to the Commonwealth.

Ms James-Velagic emphasised the importance of strong tax governance, regular reviews of elections, and proactive planning to avoid triggering FTDT. She warned that while elections may seem beneficial now, they can create restrictive and costly consequences for future generations. It’s important to be mindful of the ‘specified individual’ and ‘family group’, particularly for entities in and outside the family group when making distributions, to ensure you don’t trigger FTDT.

The ATO has also outlined circumstances where general interest charge (GIC) remission may apply, particularly for taxpayers who voluntarily disclose FTDT liabilities and act early, prior to 31 December 2026. Please note that GIC is no longer deductible from 1 July 2025.

The ATO encourages trustees and advisers to plan carefully, seek professional advice where needed, and stay up to date via its Business bulletins and other communication channels.

How can we help?

If you are concerned about FTDT or trust distributions, come and see us for specialist advice and consultation on this complex tax issue.