Why It’s Important to Prepare and Sign Trust Distribution Minutes Before 30 June 2025

Written by Julie Jung


As the end of the financial year approaches, it’s crucial for those operating a discretionary trust to prepare and sign a Trust Distribution Minute by 30 June 2025. These minutes are not just administrative paperwork. They are a key compliance requirement that helps protect your trust from unnecessary tax exposure.

What is a Trust Distribution Minute?

A Trust Distribution Minute is a formal document prepared by the trustee of a discretionary trust. It records the trustee’s decision on how the trust’s income will be distributed to each beneficiaries.

This distribution must be made before the end of the financial year.

Importantly, an annual distribution minute is required for every discretionary trust, even in years where no income is earned.

 Why Do We Need Trust Distribution Minutes?

  • Tax Efficiency: Allows income to be distributed to beneficiaries in the most tax-effective way

  • ATO Compliance: Ensures the trust remains compliant with ATO regulations, reducing the risk of audits or disputes.

  • Flexibility: Provides the ability to stream income for specific categories, such as franked dividends, capital gains, or other eligible income (if allowed by the trust deed).

  • Trustee Protection: Protects the trustee from being taxed at the highest marginal rate of 47% on undistributed income.

  • Clear Documentation: Serves as a formal record of income distribution decisions, ensuring transparency and clarity for both the trustee and beneficiaries.

  • Future-Proofing: Helps avoid future compliance issues, even if the trust earns minimal or no income during the year.

What Are the Consequences of Not Preparing a Trust Distribution Minute?

Failure to prepare a Trust Distribution Minute can result in tax consequences, with non-compliance potentially leading to unexpected liabilities. If a trustee fails to make a decision on income distribution before the end of the financial year, the trustee may become liable for tax on trust’s taxable income for that period at the highest marginal tax rate of 47%, instead of the income being taxed at the generally lower tax rates of the beneficiaries.

Even if the trust earns no income, failing to document the distribution can lead to future compliance issues.

ATO Targets Tax-Driven Trust Distributions

The ATO is closely monitoring trust distributions made primarily for tax benefits—especially when income is allocated to beneficiaries but not actually paid out. This often involves distributions to adult children or related parties on lower tax rates, while the funds remain in the trust or benefit others.

If the ATO determines that such distributions are made solely for tax avoidance, the beneficiary’s entitlement is disregarded, and the income is taxed to the trustee at the highest marginal tax rate. Trustees must ensure all distributions are based on legitimate entitlement and are properly documented.

How Can We Help?

At Salt, we can help you prepare and sign your Trust Distribution Minute, ensuring full ATO compliance and tax efficiency. Our team will guide you through the process, helping you avoid penalties and optimise your trust’s distribution strategy. Contact us to ensure your trust remains compliant and protected before the 30 June 2025.

Jenni Anderson