Tuesday, July 9, 2013

Trust distributions and 30 June


In the wash up of the passing of the financial year, an adviser contacted us last week with yet another reminder about the importance of reading trust deeds. 

In this particular instance, the adviser had taken over a client from another firm. One of the key items on the trust checklist completed for every client of this adviser's firm is confirming what date the trust deed requires income distributions to have been made by. 

The Tax Office has a long stated view that regardless of whatever concessions may be available under the tax legislation in terms of the due date for resolutions, these concessions are subject always to the trust instrument. 

The terms of the trust deed here required all resolutions to be made by no later than 12pm on 29 June in the relevant financial year. Unfortunately, the distributions for each of the previous years had all been dated 30 June, which meant they were invalid under the deed. 

The adviser was, therefore, required to begin the process for lodgement of amended returns, relying on the default provisions under the trust deed and sought our guidance on how to best address this. 

Needless to say that the income determination for the current financial year was made and passed by resolution dated 28 June, so as to at least comply with the deed this year. 

Until next week.