ATO End of Financial Year Tips for Trustees

By Daniel Butler, Fraser Stead on 17/06/2026 in ATO, Audit, Investments, SMSF compliance, SMSF strategy, Succession planning, Taxation, Trustee education

As the end of financial year (EoFY) approaches, trustees and their advisers need to be aware of their trust obligations to ensure ongoing compliance and to manage tax liabilities.

The ATO has released a list of tips designed to assist with this process, which can be found here. We cover the key parts of the ATO’s list with relevant commentary below.

ATO Tips

The ATO provides the following recommendations for trustees and advisers to help avoid basic trust errors:

Understand how income is defined in the trust estate.
Identify the trust’s beneficiaries.
Understand resolutions and present entitlement.
Keep accurate and complete records.
Check holding period rules.

Defining income for the trust estate

The starting point is that trustees should be familiar with and regularly review the rules governing the operation of the trust as contained in the relevant trust deed. This includes being aware of provisions that specify how ‘income of the trust estate’ is defined. The ATO highlight the following common errors:

actions that are inconsistent with the deed;
mistaking accounting profit for distributable income; and
misinterpreting trustee powers.

Draft TR 2012/D1 explains there is no set meaning of the phrase ‘income of the trust estate’, referred to in Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936) and related provisions. Instead the meaning will primarily depend on the terms of the trust and the statutory context of Division 6, where ‘income’ must be:

measured in respect of distinct income years;
a product of the ‘trust estate’; and
an amount in respect of which a beneficiary can be presently entitled.

An understanding of how the deed defines ‘income’ is crucial. For example, a net capital gain is included as net income for tax purposes, but if the deed does not define ‘income’ to include, among other things, capital receipts and capital gains, differences between tax and trust income can arise.

Identifying the trust’s beneficiaries

Eligible beneficiaries of the trust must be correctly identified to avoid distributions to non-beneficiaries. Further, where a family trust election (FTE) or interposed entity election (IEE) is in place, trustees should ensure that all distributions are to members of the family group of the primary individual specified in the election. For more on this issue, refer to our article — Family trust elections – one choice, lasting consequences – Part 1.

To avoid errors, the ATO state that trustees should do the following:

identify beneficiaries as per the trust deed;
ensure all entitled beneficiaries quote their TFN; and
ensure all entitled beneficiaries are notified of their entitlement.

The identification of beneficiaries involves making a number of considerations, including:

ensuring due consideration is being given to the needs of each eligible beneficiary;
making sure that beneficiaries are notified of their entitlements to manage the risks of s 100A of the ITAA 1936. For more on this issue, refer to our article — Family trusts –– managing unpaid present entitlements; and
making sure there are no foreign persons benefiting where foreign person exclusion provisions apply for duty and land tax purposes under the legislation of the relevant state or territory. For more on this issue, refer to our article — Your discretionary trust may unwittingly be subject to extra duty or land tax.

Careful review of the trust deed is required to ensure distributions to beneficiaries are done correctly in the lead up to EoFY.

Ensuring resolutions are valid

Resolutions to appoint or distribute income to beneficiaries should be validly made by 30 June, otherwise trustees risk being liable for income of the trust being taxed at 45% under, for example, s 99A of the ITAA 1936 or income being assessed to default beneficiaries under s 97 of the ITAA 1936.

Typically, distribution resolutions need to be made before midnight on 30 June or prior to any earlier date/time specified in the deed. Depending on the terms of the trust deed, there is no specific requirement for a distribution resolution to be recorded by way of a trustee resolution. In the absence of a formal resolution made prior to 30 June, evidence of the making of a decision or resolution by that date is required, such as a handwritten notes, or a family group ‘map’ showing relevant distribution amounts or percentages reflective of what was resolved.

The ATO may accept trustee resolutions prepared after 30 June that confirm a prior resolution that is not reflected in a formal document. Such resolutions should be drafted as confirmatory and dated when completed.

The ATO note that errors in respect of resolutions can be avoided by:

reviewing the trust deed to confirm how and when resolutions must be made; and
ensuring resolutions are clearly documented and made by 30 June.

Accurate and complete records

Trustees should maintain complete and accurate records to manage unforeseen tax liabilities. The ATO specifically state that bank statements and accounting records alone are not enough in this regard.

Keeping accurate and complete records may also assist trustees in the event of a dispute with the ATO. Section 14ZZO of the Taxation Administration Act 1953 (Cth) places the burden of proof on the taxpayer to prove that an assessment is excessive and what the correct assessment should be. Keeping proper records such as resolutions, financials, and supporting documentation can assist trustees in discharging this burden.

Further, s 262A ITAA 1936 and s 121-20 of the Income Tax Assessment Act 1997 also broadly require taxpayers to keep any relevant records relating to their affairs.

Hence, proper record keeping is imperative to managing tax and trust obligations.

Check holding period rules

Trustees and beneficiaries should also check that they meet the holding period rules to access franking tax offsets. Broadly, this requires trustees and beneficiaries to hold the shares ‘at risk’ for a minimum 45 days (90 days for preferences shares). Failure to do so may lead to a denial of franking tax offsets for beneficiaries. The ATO have been focusing on distributions by family trusts to corporate beneficiaries that have been established close to 30 June (ie, inside the 45 day period of 30 June). Broadly, the ATO will deny a franking tax offset in this situation on the basis that the beneficiary has not satisfied the 45 day holding period rule.

The ATO state that trustees and beneficiaries should:

review dividend and distribution statements; and
confirm that both the trustee and the beneficiary meet the rules.

These rules are complex and expert advice should be obtained.

Proposed changes from 1 July 2028

Naturally the proposed changes to the taxation of trusts announced in the Federal Budget on 12 May 2026 should also be considered in EoFY planning. For more on this issue, refer to our article — Proposed changes to the taxation of discretionary trusts from 1 July 2028.

Conclusions

The ATO tip list provides some guidance for trustees, beneficiaries and their advisers as to common issues that give rise to potential compliance concerns.

In preparation for EoFY, trustees should carefully review their trust deeds and obligations. Failure to do so can lead to breaches of duty, penalties, or adverse tax consequences arising. Given the increased complexity of managing these issues, expert advice should be obtained if there is any doubt regarding the trust deed, distribution process or resolutions, particularly where trustees intend to stream capital gains or where an FTE or IEE is in force.

DBA Lawyers would be pleased to assist. Many trust deeds that we review are considerably out of date and may not include clear or express streaming provisions. For more information on our trust advice and other services, see here.

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