Family Trust Distribution Tax (FTDT) – Key Updates and Solutions for Trustees

The Family Trust Distribution Tax (FTDT) remains a significant concern for trustees and advisers, especially with the Tax Avoidance Taskforce Trusts Program prioritising FTDT compliance. Understanding the rules, risks, and practical steps to manage FTDT is essential to avoid substantial liabilities.

Why FTDT Is a Topical Issue

The ATO has observed a rise in FTDT issues due to several factors:

• Inadequate record keeping and succession planning – poor documentation can trigger FTDT risks.
• Intergenerational expansion of private groups – complexity in family structures increases exposure.
• Limited understanding of FTEs and IEEs – many trustees and advisers underestimate the long-term impact of family trust elections (FTEs) and interposed entity elections (IEEs) on private groups.

FTDT liabilities can compound quickly, and from 1 July 2025, general interest charge (GIC) is no longer deductible, further amplifying potential financial consequences.

Key ATO Compliance Updates

To help trustees and advisers manage FTDT effectively, the ATO has introduced several measures:

• Updated guidance on family trusts and elections, available on the ATO website.
• Revised forms:
  • FTE NAT 2787
  • IEE NAT 2788
    These clarify that a “public officer” or “director of a corporate trustee” can sign declarations.
• Online services improvements: All elections lodged from January 2020 are now visible to registered agents, enabling easier tracking and confirmation of lodged elections.

Limited Administrative Relief for FTDT Liabilities

The ATO has no discretion to waive FTDT, even if the liability arises from an honest mistake. Key points include:

• FTDT arises automatically when distributions are made outside the family group.
• Elections cannot be retrospectively varied or revoked to avoid liabilities.
• Trustees must maintain robust governance and review elections regularly to minimise exposure.

Preventing FTDT – Practical Steps

Trustees can reduce FTDT risks by following ATO guidance:

1. Keep accurate records of all FTEs and IEEs.
2. Review elections annually and vary or revoke where permitted.
3. Ensure distributions remain within the family group to avoid triggering FTDT.
4. Lodge and pay FTDT promptly using the Family trust distribution tax payment advice form (NAT 6175).

Trustees should also consider the intergenerational implications of elections. Concessions that appear beneficial today may create long-term restrictions and significant financial costs for future generations.

GIC Remission – What’s Available

GIC applies 60 days after FTDT becomes payable, but limited remission may be available up to 31 December 2026:

• 80% remission: If the taxpayer proactively reviews and pays FTDT before an ATO review starts.
• Partial remission: If a voluntary disclosure is made during the early stages of an ATO review.

Remission is generally not granted once an audit has commenced or in cases involving tax avoidance, fraud, or evasion.

Key Takeaways for Private Groups

• FTDT compliance is a priority for the ATO in 2025–26.
• Poor governance and lack of awareness are major drivers of risk.
• Trustees must adopt a forward-looking approach to elections and distributions.
• Early action and professional advice can prevent escalating liabilities.

At Gavin Ma & Co, we help trustees, family groups, and private businesses manage family trust elections, succession planning, and FTDT compliance. Our team provides tailored solutions to review elections, mitigate risks, and protect wealth.

Contact Gavin Ma & Co today to review your family trust strategy and ensure compliance with FTDT regulations while safeguarding your family group’s financial future.