Until recently the ATO has generally allowed trustees of discretionary trusts until 31 August to document resolutions of income distributions for the year ended 30 June
However following the decision in Colonial First State Investments v FC of T 2011 ATC 20-235, the ATO now take the strict view that trustees must resolve to distribute the current year's income on or before 30 June.
The ATO has advised that it will be running an education campaign to ensure trustees are aware of this requirement. They have also indicated that they will be actively reviewing compliance with this requirement in future years.
Within the first few weeks of July 2012 the ATO is intending to request a significant number of trustees provide a copy of their resolution of distribution for the year ended 30 June 2012 to confirm that it was made prior to 30 June.
If the resolution is not made by 30 June the trustee may be assessed on all income of the trust and be liable for tax at the top marginal tax rate of 46.5%.
Collins Hume are keen to help you ensure you meet your obligations as a trustee. If you are a trustee of a discretionary trust and Collins Hume client, we will be in touch with you prior to 30 June. Meantime we invite you to call us on 02 6686 3000 if you have any questions or would like further advice in this regard.