Q:  In your last Bulletin you mentioned about updating trust deeds.  I only set up a family trust last year.  Does this apply to me?  Is there anything else I need to do before the end of financial year to get the best out of my family trust?

With just days to go until the end of the financial year you need to take some urgent action to make sure that your family trust can do what it was set up to do – that is, to provide the most tax effective arrangements for your family.

Even though you only set up your trust last year there have been some important changes to trusts laws since this time.  These changes will impact you if you do not act on them by the end of this week.

Trust Distribution Minutes:
The deadline for recording any intended 2011-12 distributions to beneficiaries is now 30 June.  Up until this year the deadline was 31 August but the ATO has brought it forward by two months as a result a 2011 Federal Court decision. 

To be legally effective, your trust distribution minutes must contain a written resolution about what distributions are to be made and must be signed and dated by 30 June.  Distributions include income and streaming of capital gains and franked dividends.  There is no need to have the accounts prepared by this date, just the minutes.

LawCentral highly recommends you make and record your 2011-12 trust distribution resolution  ASAP.  For those of you who have done this before you may be tempted to base your resolution on old trust distribution minutes.  We don’t recommend doing this.  It is best to use the most up-to-date document incorporating all of the changes to law that have taken place in the last year.  You can take advantage of our trusts expertise and build your own 2011/12 Trust Distribution Minutes now. 

Update your Trust Deed
As any distribution you make must be consistent with your trust deed it is also vital that you amend your trust deed to incorporate developments in trusts law.  Developments in the last year include how income equalisation, streaming, franking credits and attribution clauses will be interpreted by the ATO.

Even if you only set up your trust last year, your trust deed must be amended so that you can take advantage of these changes.  Platinum readers can find out more about the changes your deed will require.

You need to be careful that any changes to the trust deed do not resettle the trust for either capital gains tax or State duty purposes.

LawCentral has developed a deed of variation which will incorporate the most recent changes to trusts law, making sure your deed complies, without triggering a resettlement.  You can build your own document now: Family Trust - Streaming and Bamford Update

What happens if I don’t do anything or if my minutes or deed are non-complying?
The short answer to this question is that your beneficiaries won’t get the intended benefits.  They may be liable to pay higher tax rates than necessary and/or other tax benefits such as CGT discounts or franking offsets could be reduced or not available.   It’s not worth the risk.

If you need any last minute advice about trusts, Joseph Santhosh, Civic Legal’s trust expert would be pleased to help.  Contact Joseph at Joseph.Santhosh@civiclegal.com.au or call him at Civic Legal on 9460 5000.

Build these documents now…

• Trust Distribution Minutes Library for  2011/12
• Family Trust - Streaming and Bamford Update

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