Family trust distribution tax  

April 27, 2023

As year-end resolutions are being prepared, ATO reminds it is important to consider client’s trust deed and who is and isn’t a beneficiary of the trust. Where an FTE or IEE has been made its important to identify who is in the family group.

Family trust distribution tax happens when a trust that has made a family trust election (FTE), or an entity that has made an interposed entity election (IEE) makes a distribution outside of the family group of the specified individual in their election.

Distributions to beneficiaries outside the specified individual’s family group will trigger FTDT at 47%. This includes when distributing to another entity. Trustees and their advisors should remain vigilant with FTEs and IEEs to remove the risk of FTDT applying.

For non-fixed (discretionary) trusts to be within another trust’s family group, they would need to have either:

  • a FTE with the same specified individual in place, or
  • an IEE to be a member of the specified individual’s family group.