Since the rise in usage of family trusts in Australia from the 1970s, trustees of family trusts have been subjected to many changes/interpretations in the law handed down by the Courts, the ATO and the State and Federal governments. These changes make it vital that Trustees and their advisers carefully review the distribution minutes that they use each year to ensure that they still follow best practice.

The recent Victorian Supreme Court of Appeal decision of Owies v JJE Nominees Pty Ltd (ACN 004 856 366) (in its capacity as the trustee for The Owies Family Trust) [2022] VSCA 142 (“Owies”) handed down in July last year has put trustees on notice of the need to genuinely consider all beneficiaries, and in particular the primary, named or specified beneficiaries when making their trust distributions. The failure to do so may result in certain trust distributions made in a particular year being voidable.

This case highlights the point that for a trustee to genuinely consider a beneficiary as being entitled or not entitled to income for a particular accounting period, the trustee should as a minimum, make enquiries as to the primary, named or specified beneficiaries’ circumstances.

The absence of such evidence may assist a beneficiary in making a successful claim against the trustee for not receiving a (or receiving an inadequate) trust distribution in a particular year.

For the trustee to avoid an adverse court judgment against them for future trust distributions, the trustee may need to do one or more of the following:

1. Make enquiries each accounting period on the needs and circumstances for every primary/named/specified beneficiary as a minimum;
2. Internally document their enquiries and considerations;
3. Consider removing certain primary beneficiaries from the trust - subject to review of the trust deed.

Law Central has revised our annual Trust Distribution Minutes Library for the 2022/2023 financial year to assist trustees with dealing with the issues raised in the Owies case. The Minutes Library this year includes various enquiry letters which the trustee may wish to use.

The Trust Distribution Minutes Library covers a range of scenarios that you are likely to encounter in making your trust distributions. These include situations where you can “stream“ income of a certain type such as net capital gains and franked distributions to specific beneficiaries. The Trust Distribution Minutes Library also includes comprehensive notes to assist the Trustee in making their distributions.

As in previous years, Law Central’s Trust Distribution Minutes Library comes in 2 varieties. For use with a single Trust, Trustees can purchase the Trust Distribution Minutes Library For 2022/23 - Single-Use for only $132. For Accountants and Advisers preparing minutes on behalf of their clients for multiple Trusts, we have the Trust Distribution Minutes Library For 2022/23 - Multi-Use for only $363.

For legal advice regarding trusts and trust distributions, please contact John Wojtowicz from Law Central Legal on 08 9476 4999 or john@lawcentrallegal.com.au