A trust may elect to be treated as a family discretionary trust and be able to enjoy numerous tax benefits such as the ease of distributing trust income freely to any beneficiaries listed in the trust, more relaxed tests for claiming tax losses, the ability to inject other income into a trust and the ability to claim over $5,000 in franking credits.
To be considered a family discretionary trust, the Australian Taxation Office (ATO) requires the trustee to specify in the family trust election a particular individual around whom a family group is formed.
It should be noted that the repercussion of this requirement may not be beneficial to the family trust because the distribution of trust income is now limited to the family group only. Any distribution outside of the family group triggers significant adverse tax outcomes, such as family trust distribution tax.
Should you require assistance in reviewing your discretionary family trust deed or making a family trust election, please contact our tax lawyers and tax accountants by clicking here to submit an online enquiry form or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.