As always, trustees of discretionary trusts are required to make and document resolutions on how trust income should be distributed to beneficiaries for the 2018-19 financial year by 30 June.
If a valid resolution is not executed by 30 June, any default beneficiaries under the deed will become presently entitled to trust income and subject to tax (even where they do not receive any cash distribution), or the trustee will be assessed at the highest marginal tax rate on any taxable income derived but not distributed by the trust.
A trustee must be able to show how an effective resolution was made through minutes, file notes or an exchange of correspondence documented before year end. However, the trust’s accounts do not need to be prepared by 30 June.
As a corporate trustee may need time to notify its directors that a meeting must be convened to pass and record a resolution, such a notice should be sent out well before the 30 June deadline.
