Trust Distribution Deadline: Why 30 June Resolutions Matter (2025-26)

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

For trusts, 30 June is not just the end of the income year — it is the deadline for determining who pays tax on the trust’s income. If the trustee does not make a valid distribution resolution by midnight on 30 June, the consequences can be severe.

Why 30 June is a hard deadline

Under Division 6 of the Income Tax Assessment Act 1936, beneficiaries who are presently entitled to a share of the trust’s income at 30 June are assessed on their proportionate share of the trust’s net income. Present entitlement is established by the trustee’s distribution resolution.

If the resolution is not made by 30 June, or if it is defective, there may be no beneficiary who is presently entitled. That changes everything about how the income is taxed.

Section 99A: the penalty rate risk

Where trust income exists and no beneficiary is presently entitled to it at 30 June, the trustee is assessed on that income under section 99 or section 99A.

• Section 99A applies the top marginal tax rate (currently 45% plus Medicare levy) to the undistributed income
• Section 99 applies the normal individual rates, but the ATO will generally argue for section 99A unless the circumstances fall within the specific exceptions
• The practical effect is that failing to distribute by 30 June can result in the trust’s income being taxed at the highest possible rate

This is not a theoretical risk. The ATO has successfully pursued trustees who failed to make timely resolutions.

Streaming capital gains and franking credits

Trust deeds that contain appropriate streaming provisions allow the trustee to direct specific types of income to specific beneficiaries. The two most commonly streamed categories are:

• Capital gains: Can be streamed to beneficiaries who can use the 50% CGT discount (individuals and other trusts, but not companies). The resolution must specifically make the beneficiary entitled to a share of the trust’s capital gain.
• Franking credits: Can be streamed to beneficiaries who benefit most from the franking credit offset. The resolution must specifically allocate franked distributions to those beneficiaries.

Streaming must be permitted by the trust deed and supported by a valid resolution made by 30 June. If the deed does not allow streaming, income is distributed proportionately.

Minor beneficiary restrictions

Distributions to beneficiaries under 18 are subject to special rules under Division 6AA.

• Minors are taxed at penalty rates on unearned income (including trust distributions) above $416 per year
• The penalty rate reaches 66% on income above $1,307 (for 2025-26)
• There are exceptions for income from a deceased estate, disability trusts, and certain other categories
• Distributing to minors to reduce the family’s overall tax burden is generally not effective because of these penalty rates

Documentation requirements

The ATO does not prescribe a specific form for trust distribution resolutions, but the resolution must be:

• Made before midnight on 30 June — this is the critical timing requirement
• Consistent with the trust deed — the resolution cannot distribute in a way the deed does not permit
• Clear and specific — identify each beneficiary and their entitlement (percentage, fixed amount, or share of specific income types)
• Evidenced in writing — while the ATO accepts that records can be created after 30 June as evidence of a decision made before that date, having a signed and dated minute is far stronger evidence

Keep the resolution with the trust’s permanent records. If the ATO queries the trust’s distributions years later, the resolution is the primary document.

What to check in the trust deed

Before making a distribution resolution, confirm:

• Who are the potential beneficiaries (named individuals, classes of beneficiaries, default beneficiaries)?
• How does the deed define “income” — accounting income, distributable income, or net income for tax purposes?
• Does the deed permit streaming of capital gains and franking credits?
• Are there any restrictions on distributions to specific classes of beneficiaries?
• Is there a default beneficiary clause that operates if the trustee does not make a resolution?

A default beneficiary clause can be a safety net, but relying on it is poor practice. The default allocation may not be tax-efficient.

Action items before 30 June

• Review the trust deed for distribution powers and any streaming provisions
• Estimate the trust’s net income for the year (including capital gains and franked dividends)
• Determine the most tax-effective allocation across eligible beneficiaries
• Prepare and sign the distribution resolution before 30 June
• Ensure the resolution specifically addresses capital gains and franking credits if streaming is intended
• File the signed resolution with the trust’s permanent records

Key dates

• 30 June 2026 — Distribution resolution must be made by midnight. This is a hard deadline with no extension.

Next step

• If the trust includes a company beneficiary, check the company tax position with the Company Tax Calculator

This is general information only. Rules and thresholds can change. Check with the ATO or a registered tax agent for your specific situation.