Trust distribution resolutions before 30 June 2026: getting them right

Trustees of discretionary (family) trusts must make a valid resolution to distribute the trust's income for the year ended 30 June 2026 on or before that date — generally by close of business on 30 June. If no effective resolution is in place by year end, no beneficiary is presently entitled to the income, and the trustee can be assessed on the trust's net income at the top marginal tax rate (plus Medicare levy). The resolution does not have to be lodged anywhere, but it must exist, be effective under the trust deed, and be capable of being proven.

This is the single most time-sensitive obligation in the discretionary-trust calendar. The Australian Taxation Office sets out the requirements on its Trustee resolutions page, and the related compliance expectations are recorded in the trustee-resolution-30-june obligation.

The short answer

To distribute trust income for the 2025–26 year:

• The trustee must resolve who gets what before 30 June 2026 (or by an earlier date if the deed requires it).
• The decision must make one or more beneficiaries presently entitled to the trust's income for that year.
• The resolution must be effective under the trust deed and able to be evidenced if the ATO asks.

Miss the deadline and the default beneficiary clause (or, worse, an assessment of the trustee at the top rate) applies. This is a hard year-end cut-off, not a deadline tied to lodging the trust tax return.

Who this applies to

This obligation applies to trustees of discretionary trusts — the trustee holds a power to decide, each year, how income is distributed among a class of beneficiaries. It is most relevant to family trusts and many small-business trading or investment trusts.

It is generally not an annual decision for:

• Fixed (unit) trusts, where beneficiaries' entitlements are set by their unit holdings rather than an annual discretion.
• Bare trusts and some testamentary or special-purpose structures.

If you are unsure which category a trust falls into, the trust deed governs — read it before assuming a resolution is needed (or that it is not). Tax obligations of this kind sit within the broader tax compliance area.

What a valid resolution must do

A resolution must do more than nominate a name and a dollar figure. To be effective it should:

• Be authorised by the trust deed. The trustee can only distribute in the ways the deed allows, to beneficiaries within the defined class, using the income-determination method the deed specifies.
• Make a beneficiary presently entitled. The beneficiary's right to the income must be vested and, per the ATO, effectively indefeasible — it cannot be something the trustee can simply take back later.
• Deal with the whole of the income. If part of the income is left unallocated, the default-distribution clause of the deed applies to that part, or the trustee is assessed on it.
• Be made by the right person(s). Where there are multiple trustees or a corporate trustee, follow the decision-making process the deed and the company's constitution require.
• Be documented. A resolution can be oral and still valid if the deed permits, but a written, signed and dated record made before 30 June is far easier to defend.

A practical point on percentages versus dollar amounts: because the trust's final income figure is rarely known on 30 June, many trustees express entitlements as proportions or with a defined ordering, rather than fixed dollar amounts that may not match the year-end accounts. Whichever approach the deed supports, the wording must withstand scrutiny.

Timing: why 30 June matters

Present entitlement to trust income is tested at the end of the income year. The ATO's view, reflected in its longstanding guidance on the timing of present entitlement, is that a beneficiary must be presently entitled as at 30 June — a resolution made after year end cannot retrospectively create that entitlement for the year just ended.

Some deeds also impose an earlier internal deadline (for example, a specified number of days before year end). The deed's date prevails if it is earlier than 30 June, so check it rather than assuming the statutory year-end is the only constraint.

Consequences of getting the timing wrong:

Streaming capital gains and franked distributions

If the trust wants to stream capital gains or franked distributions (with their attached franking credits) to particular beneficiaries, additional timing rules apply. To stream effectively, the relevant beneficiary generally must be made specifically entitled to the capital gain or franked distribution, and the records supporting that entitlement must be in place within the timeframes the law sets:

• For franked distributions, the specific entitlement must generally be recorded by 30 June.
• For capital gains, the relevant record must generally be made by 31 August following year end.

These are distinct from the general income resolution and easy to overlook. The ATO covers the mechanics under its guidance on becoming specifically entitled. Confirm the trust deed actually permits streaming before relying on it.

Common pitfalls that invalidate a resolution

Recurring problems the ATO and advisers see include:

• No resolution made at all, or one made after 30 June and back-dated — back-dating is a serious integrity issue and will not be accepted.
• Distributing to a beneficiary outside the deed's class, or in a manner the deed does not authorise.
• Using an income definition that doesn't match the deed. If the deed defines "income" in a particular way, the resolution and the accounts must follow it.
• Leaving a "gap" so that part of the income is undistributed and falls to default beneficiaries or the trustee.
• Family trust election interactions. Distributing outside the "family group" of a trust that has made a family trust election can trigger family trust distribution tax at the top rate.
• Division 7A and reimbursement-agreement risks. Entitlements to a corporate beneficiary that remain unpaid (unpaid present entitlements), or arrangements where the benefit flows to someone other than the presently entitled beneficiary, can attract ATO attention under Division 7A and section 100A. Review the ATO's reimbursement agreement guidance before distributing to entities that won't actually receive the cash.

What trustees should do before 30 June 2026

A practical checklist:

1. Read the current trust deed (including any variations) and confirm the income-distribution power, the beneficiary class, the income definition and any internal deadline.
2. Confirm the beneficiaries you intend to benefit are within the class and, where a family trust election exists, within the family group.
3. Estimate the year's income so the chosen proportions or ordering make commercial sense, even though final figures come later.
4. Decide on any streaming of capital gains or franked distributions and the specific-entitlement records needed.
5. Prepare and sign the resolution before 30 June 2026, dated, with all required trustee signatures.
6. Retain the documentation with the trust's records — you do not lodge it, but you must be able to produce it.

Given the top-rate consequences of error, most trustees finalise resolutions with their accountant or tax agent well before year end rather than in the final days. The underlying obligation and its annual cadence are tracked at trustee-resolution-30-june.