Avoid the 47% Tax Trap

Avoid the 47% Tax Trap - Trust Distribution Deadline Approaching. As we approach 30 June 2025, it's vital to turn your attention to one of the most important year-end tax planning strategies for trust clients — the Trust Distribution Resolution. If you have a Discretionary (Family) Trust, then this directly affects you.

Why Acting Before 30 June Matters

Suppose the Trust does not have a valid income distribution resolution by 30 June 2025. In that case, the Australian Taxation Office (ATO) may assess all taxable trust income at the top % marginal tax rate of 47%. This can occur even if you intended to distribute the income to beneficiaries in lower tax brackets.

What You Need To Do – And How We Can Help

Preparing a Trust Distribution Resolution can be complex, but our team is here to guide you through it. We will:

• Review last year's resolution to ensure alignment and compliance. Estimate the Trust's income for the year ending 30 June 2025

• Review your Trust Deed to confirm it permits the intended distributions

• Recommend a tax-effective income distribution strategy based on your family group and financial position

• Prepare the formal Trust Distribution Resolution, ensuring the Trustee signs it before 30 June 2025

Tip for our Primary Producers & Agribusiness Clients

We know the unique financial challenges and planning opportunities that come with working the land. For our clients in agriculture and primary production, we give special attention to:

• Income Averaging Provisions – Take advantage of tax-smoothing tools

• Farm Management Deposits (FMDs) – Offset high-income years

• Seasonal Income Volatility – Plan distributions considering harvest cycles and market pricing

• Succession & Family Planning – Align distributions with long-term family succession goals

• Low-Income Family Members – Strategically allocate distributions to younger family members involved in operations

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Nijo Antony

Director