ATO’s EOFY Checklist for Trusts – What Trustees Need to Know

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As the end of financial year approaches, the Australian Taxation Office (ATO) is reminding trustees to stay on top of their compliance obligations. Getting it wrong can mean unnecessary tax bills, breaches of trust, and even severe penalties.

To help, the ATO has published a practical trust compliance checklist. Here’s what trustees and advisers should be focusing on before 30 June.

1. Understand How Trust Income Is Defined

There’s no single definition of “income of the trust estate”. It depends on the wording of your trust deed and tax law. For example, while capital gains are included as taxable income, they may not count as distributable income under your deed unless expressly included. This can create mismatches if not carefully managed.

2. Identify Beneficiaries Correctly

Beneficiaries must be clearly identified to avoid invalid distributions. Trustees should also:

  • Consider the needs of each beneficiary.
  • Ensure beneficiaries are notified of their entitlements (to avoid s 100A risks).
  • Check whether any foreign beneficiaries are excluded for state duty or land tax reasons.

3. Make Valid Resolutions Before 30 June

Trust distribution resolutions must generally be made by midnight 30 June (or earlier, if required by the deed). If a resolution is invalid or late, all trust income could be taxed at the highest marginal rate. Evidence of decision-making – such as notes or a family group “map” – is critical if formal resolutions aren’t prepared in time.

4. Manage Family Trust Elections (FTE) and Interposed Entity Elections (IEE)

These elections are vital to prevent family trust distribution tax (FTDT) at 47%. Distributions outside the elected family group can trigger this punitive tax. Trustees should review who is in their family group and confirm elections are up to date.

5. Keep Records Clear and Accurate

The ATO emphasises that robust record-keeping is essential. Poor records increase the risk of compliance issues and disputes.

Why It Matters

The ATO is paying close attention to how trusts operate, especially in private groups. Out-of-date deeds, missing resolutions, or sloppy administration can expose trustees to unnecessary tax and penalties.

Next Steps

Trustees should review their trust deeds, ensure resolutions are in order before 30 June, and seek professional advice if in doubt. Staying ahead of these obligations is not just about avoiding penalties – it’s about protecting the integrity and future of your trust.

👉 Need help preparing your trust for EOFY? Contact Richard A Bobb Chartered Accountants for expert guidance.

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