EOFY Tax Planning tips for Trusts 2026-27

Trust deed review and resolutions 

Trustees need to ensure trust distribution resolutions are prepared and signed by 30 June 2026, in accordance with the trust deed. 

Trustees need to be mindful of the ATO’s current focus areas. Trustees should also consider having the trust deed reviewed by a solicitor to ensure it remains fit for purpose, including: 

• confirming whether the deed permits the streaming of different classes of income (such as capital gains and franked distributions) and that distribution resolutions appropriately reflect the character of the trust’s income;
• reviewing the appointor/guardian succession provisions to ensure there is a clear and effective line of succession;
• confirming the trust’s vesting date and whether any action is required; and
• ensuring the trustee’s powers remain appropriate for the trust’s current activities and objectives. 

Family Trust Elections (FTEs) 

Where a trust has made a Family Trust Election, or distributes income or capital to related companies, trusts or partnerships, special tax rules apply that can restrict who distributions may be made to once an election is in place.

Changes to group structures, ownership or control, or the introduction of new entities during the year can unintentionally result in family trust distribution tax if distributions are made outside the family group. Trustees should review proposed distributions where structural changes have occurred during the year. 

Section 100A – family trust arrangements 

The ATO continues to focus on trust distributions where the beneficiary does not ultimately receive and enjoy the benefit of the income. 

Section 100A is an anti avoidance provision that may apply where trust income is distributed to one beneficiary, but under an arrangement or understanding, the benefit is provided to another person. 

Trustees should: 

•  Review proposed distributions to ensure beneficiaries are expected to genuinely receive and retain the benefit of their entitlement.
• Exercise caution where distributions are made to adult children (aged 18 and over) or corporate beneficiaries, particularly where funds may be redirected, retained by the trust, or applied for another person’s benefit.
• Identify arrangements involving unpaid present entitlements (UPEs) or delays in payment and consider whether these are consistent with ordinary family or commercial dealings.
• Avoid circular, informal or “on paper only” arrangements where trust income is used by another party.
• Ensure distribution decisions are properly documented and supported by a clear commercial or family rationale. 

Division 7A Loans – 

Trust distributing to a company When deciding to distribute income from a trust to a company during the 2026 financial year trustees need to ensure they have considered Division 7A consequences. 

An unpaid present entitlement (UPE) owing to the company may give rise to adverse tax consequences if it is not appropriately managed by the company’s lodgement day. Management may include the need for the entitlement to be repaid or placed on a complying Division 7A loan arrangement within the required timeframe. Clients with trust structures used for business or investment purposes are encouraged to review their arrangements before 30 June and discuss any proposed distributions with their RSM adviser to ensure compliance with current ATO guidance.

Trustees’ discretionary powers 

Trustees of discretionary trusts should be aware that, despite broad discretionary powers, they are required at law to exercise their discretion in good faith, with real and genuine consideration, and in accordance with the purposes for which the discretion was conferred. 

A failure to do so may result in a distribution being void or voidable. 

This principle was highlighted in Owies v JJE Nominees Pty Ltd [2022] VSCA 142. In practice, trustees should ensure they are appropriately informed of beneficiaries’ circumstances and that distributions reflect the trust’s intended purpose. Trustees are not required to record their reasons for decisions, and care should be taken where specific reasons are documented, as these may be subject to scrutiny.

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