A quick question, if a discretionary trust has rental income for this financial year, all the rental income (excluding any GST collected (commercial property)) must be distributed before 30th June, is that correct? Or is it that only the intended amount or percentage to be distributed between the individuals must be written and signed by the trustees, but the money can be distributed after in July?
Discretionary Trust distributions - NSW
- Thread starter thesuperman
- Start date
No, the trustee must make the resolution before 30 June. Failure to do so could mean no beneficiary is presently entitled to the income and the trustee will end up paying tax at the top rate.
The resolution can be made after 30 June but before mid August if relates to a capital gain. If it contains income its must be made before 30 June. Despite this ATO view that limits a later resolution for a capital gain I argue its a risk best avoided.
The manner of the trust distribution should very carefully consider the terms of the trust deed too. If the trust deed says that the Trustee must make a resolution then a minute may not comply. I often see distribution clauses which oblige the trustee to consider streaming of income and the resolution then needs to reflect that requirement and not ignore it just because the income is derived from rent for example. It may also need to address some issues relating to differences between what I will call accounting income and trust income....The trust deed may well insist the trustee resolve to distribute the income based on the financial reports but for tax purposes a loss could affect that...
Then there is the issue of a non-resident beneficiary...You may resolve to distribute to the non-resident BUT the trustee is assessed tax. The resolution should reflect this.
The manner of the trust distribution should very carefully consider the terms of the trust deed too. If the trust deed says that the Trustee must make a resolution then a minute may not comply. I often see distribution clauses which oblige the trustee to consider streaming of income and the resolution then needs to reflect that requirement and not ignore it just because the income is derived from rent for example. It may also need to address some issues relating to differences between what I will call accounting income and trust income....The trust deed may well insist the trustee resolve to distribute the income based on the financial reports but for tax purposes a loss could affect that...
Then there is the issue of a non-resident beneficiary...You may resolve to distribute to the non-resident BUT the trustee is assessed tax. The resolution should reflect this.
Thanks for both your comments. To clarify, a resolution must be made before 30th June naming the individuals who will receive the distributions & amounts they will receive, but the actual distribution can be made after 30th June, correct? Considering that rental income paid by the tenant for June would be paid by the real estate agent sometime in July.
What's the difference between a resolution & a minutes meeting? Aren't they the same or similar?
Are these not the same?
If someone lives overseas for more than a full tax year but intends to move back to Australia, they would be still classified as a "resident beneficiary". Am I correct in understanding this?
What's the difference between a resolution & a minutes meeting? Aren't they the same or similar?
Are these not the same?
If someone lives overseas for more than a full tax year but intends to move back to Australia, they would be still classified as a "resident beneficiary". Am I correct in understanding this?
And a distribution to ABC PL when ABC PL is the trustee company isnt clever.
Superman...Distribution of income from a trust occur when the beneficiary becomes "presently entitled and this occurs when the trust resolves to distribute (provided its valid) rather than when its paid. The key concern is that if the resolution is nvalid then there is no distribution of income so the trustee is the taker in default under tax law. Ouch - Highest marginal tax rate. The taxpayers may have an unpaid entitlement and that doesnt invalidate the entitlement. It may be paid a month later, a year later or held indefinately as an unpaid entitlement. The exception to this rule is a bucket company. Such arrangmnets are only usually valid if the actual $$ are paid to the company before the return is lodged.
I avoid minutes. Minutes are a record of a meeting rather than a record of approved decisions in many instances. Minutes are what old fashioned advisers discuss. Modern risk averse advisers suggest resolutions. A resolution is a decision. ie to distribute income. A resolution signed by one person as a true record is far better as a record of what was decided not what was considered and can be far less incriminating than a minute. Minutes are good for public entities etc dont get me wrong.
If a person leaves Australia for a year or more and returns they were probably always a tax resident and there is no issue to consider. Working overseas doesnt make a person non-resident. If a person departs Australia and is cerainly a non-resident then flys back in on 29 Jun intending to stay then they are a resident at the time of becoming entitled.
Superman...Distribution of income from a trust occur when the beneficiary becomes "presently entitled and this occurs when the trust resolves to distribute (provided its valid) rather than when its paid. The key concern is that if the resolution is nvalid then there is no distribution of income so the trustee is the taker in default under tax law. Ouch - Highest marginal tax rate. The taxpayers may have an unpaid entitlement and that doesnt invalidate the entitlement. It may be paid a month later, a year later or held indefinately as an unpaid entitlement. The exception to this rule is a bucket company. Such arrangmnets are only usually valid if the actual $$ are paid to the company before the return is lodged.
I avoid minutes. Minutes are a record of a meeting rather than a record of approved decisions in many instances. Minutes are what old fashioned advisers discuss. Modern risk averse advisers suggest resolutions. A resolution is a decision. ie to distribute income. A resolution signed by one person as a true record is far better as a record of what was decided not what was considered and can be far less incriminating than a minute. Minutes are good for public entities etc dont get me wrong.
If a person leaves Australia for a year or more and returns they were probably always a tax resident and there is no issue to consider. Working overseas doesnt make a person non-resident. If a person departs Australia and is cerainly a non-resident then flys back in on 29 Jun intending to stay then they are a resident at the time of becoming entitled.
1. Individuals + company, another trust etc
2. Cash v's accruals....Many trusts choose to adopt the calendar basis when the reality is June rent will be received July. Thats fine if it is applied consistenly each year. The ATO sees no mischief in adopting either the cash or the accrual basis. Some REA pay the June amounts in on 30Jun and others dont. Its not unusual for personal taxpayers to adopt a similiar approach.
Distributions do not have to state the $. You can resolve a % based on a notional estaimate eg $38,000 then resolve soon after 30 June for the final eg $36,700. Estimates are used regularly (google June trust estimated distribution for many examples).
Thanks again for your comments. Yes I've seen examples where usually a % is being distributed, but if a fixed amount was used, eg. $10k to Person A and the balance to Person B because this is the most beneficial, is simple wording sufficient like the below?
For example in the resolution it has a box that stating the person's name and then below it stating:
"Person A - "$10k to be distributed"
"Person B - "the balance of the funds to be distributed"
You had better not word it like that!
Of course for "Person A" etc. it would have the person's name there. What's wrong with the other wording? It's a fixed sum to one person & the remaining balance to the 2nd person.
doesn't make sense
Not sure how Law Central may feel about their trust distribution templates being recycled in such a manner. It is intellectual property and copyright infringement is not something for this forum to promote. I'm sure Michael and his team at Hosuse of Wealthwould recommend all distribution minutes be prepared with guidance.
Moderator ? Cut the link ?
Moderator ? Cut the link ?
Paul
Get your facts straight before making any accusations. Firstly it is a multi-use license which I have paid $350 for. The trust distribution resolutions are for the clients of House of Wealth. They have been loaded to the website for our clients only. Emails have been sent to our clients only.
Please see the license conditions. "Law Central grants a limited license to the purchaser to use these Trust Distribution Minutes for the 2013-2014 financial year only for multiple Trust Deeds on behalf of themselves, their staff and their clients. This license is non-transferable."
Respectfully keep your nose out of other people's business unless you know the facts. The page has now been password protected and only clients will be able to access the page now.
You seem to jump to a number of conclusions without getting all the facts straight. Hope you aren't doing the same for your own clients.
To be honest it is highly unprofessional to make accusations particularly of a legal nature without having the facts. We haven't breached any copyright or licensing issues in accordance with what we purchased. We do recommend clients seek guidance in preparing the resolutions and they have done so. As a professional a quick phone call or email to raise a concern would have been nice. Terry Waugh did that and asked me the same question. He recommended password protecting it and a good idea. A shame you didnt extend the same courtesy.
I havent made a post referring to the distribution resolutions on somersoft as they were intended for clients only.
And Oracle you did nothing wrong at all.
Get your facts straight before making any accusations. Firstly it is a multi-use license which I have paid $350 for. The trust distribution resolutions are for the clients of House of Wealth. They have been loaded to the website for our clients only. Emails have been sent to our clients only.
Please see the license conditions. "Law Central grants a limited license to the purchaser to use these Trust Distribution Minutes for the 2013-2014 financial year only for multiple Trust Deeds on behalf of themselves, their staff and their clients. This license is non-transferable."
Respectfully keep your nose out of other people's business unless you know the facts. The page has now been password protected and only clients will be able to access the page now.
You seem to jump to a number of conclusions without getting all the facts straight. Hope you aren't doing the same for your own clients.
To be honest it is highly unprofessional to make accusations particularly of a legal nature without having the facts. We haven't breached any copyright or licensing issues in accordance with what we purchased. We do recommend clients seek guidance in preparing the resolutions and they have done so. As a professional a quick phone call or email to raise a concern would have been nice. Terry Waugh did that and asked me the same question. He recommended password protecting it and a good idea. A shame you didnt extend the same courtesy.
I havent made a post referring to the distribution resolutions on somersoft as they were intended for clients only.
And Oracle you did nothing wrong at all.
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