2017 Profit Distributions from a Trust

Did you know that every Family Trust is required to make a resolution before 30 June each year as to who will be receiving the profits of the Trust?  And, that you also need to note how much each person will be receiving.

If the Trustee of the Trust fails to do this, then the ATO could assess the Trustee of the Trust at the highest marginal tax rate (currently 49%) on all the profits, rather than the beneficiary’s own marginal tax rates.

Distributions of profits can be made to Individuals and other entities.  During the Tax Planning process, we work closely to anticipate the level of your profits for the current financial year and implement tax strategies to ensure the profits and associated taxes are optimised to the best and most appropriate level for you.

Once this profit has been determined, the Trustee is required to prepare and sign what is known as a Trust Resolution – ultimately, this is a record or a minute, or a meeting held by the Trustees recording their decision.  This must clearly state who the beneficiary(ies) are going to be and what amount of profit they will be receiving.

Did you know that a beneficiary can also be another Company?  This is a strategy that we implement where appropriate, to quarantine some profits in another entity.  This can then be used to pay Franked Dividends to the company’s shareholders in the future, or can be used for other investment activities down the track.

The Tax Planning process is one of the most important processes in the business calendar – but we must not lose sight of the fact that preparing a Profit & Loss Budget and Cash Flow Budget are also important.  During Tax Planning, we are looking for opportunities within your business to ensure that your potential income tax liability is identified before the end of the financial year, and that you are you are 100% aware of the amount that this may be.  We all hate Tax surprises.

One thing that I say to all my clients is that their job is to maximise their profit, and our job is to minimise your tax and of course, staying within the legal boundaries.  Imagine what you could do with the money we can save you on your tax – pay a bit more into super, maybe tip a bit more onto the home loan, maybe even buy another home.  So, if you have not yet had any tax planning done, you still have a few weeks to get in touch with us to get this done.

Once we know the profit, then we can prepare the Trust Resolutions (if it’s applicable to your business) and you will end the financial year feeling comfortable that firstly, you know what your profit is going to look like, you will know what your tax liability is likely to be, and you are remaining fully compliant with your tax requirement.

Give one of our team a call – they will be happy to help you.