Every year, trustees of discretionary trusts have to decide who is presently entitled to the trust's income for that year, and the decision has to be made by 30 June. Not by the time you lodge. Not when the accounts are finished. By 30 June.
If no valid resolution is made in time, the consequences are unpleasant and entirely avoidable. Depending on the deed, the income may default to a named default beneficiary who may be on a high marginal rate, or the trustee may be assessed on the income at the top marginal rate of 45 per cent.
What goes wrong
The resolution is made too late. Signed in August, dated 28 June. This is more common than anyone would like and it is exactly the kind of thing that does not survive scrutiny.
The resolution does not match the deed. Every trust deed is different. Some define income in a particular way, some require distributions in specified proportions, some restrict who can be a beneficiary, some require the resolution to be in a particular form. A generic template that was not read against the deed is a resolution that may not do what it says.
The beneficiary is not actually a beneficiary. Deeds define beneficiary classes, and people move in and out of them. A distribution to someone outside the class is not effective, and where a family trust election is in place, a distribution outside the family group triggers family trust distribution tax at 47 per cent.
Streaming is attempted without the deed supporting it. Franked dividends and capital gains can be streamed to particular beneficiaries, but only if the deed allows it and the resolution does it properly, with the specific entitlement recorded.
The numbers are unknown. You are resolving before year end, so final figures often are not available. That is fine. Resolve in percentages or by formula rather than dollar amounts, provided the deed permits it.
What the ATO looks for
Written evidence, made in time, that reflects a real decision by the trustee, consistent with the deed.
The minutes should record the date, the resolution, the beneficiaries and their entitlements, and who made it. If a corporate trustee, the directors' resolution. Keep the deed and any variations with it, because the resolution cannot be assessed without them.
The two additional things to think about this year
Section 100A has not gone away. Where an entitlement is conferred on a beneficiary but the benefit actually flows to someone else, the arrangement may be a reimbursement agreement, and the Commissioner has an unlimited period to amend assessments where it applies. The classic pattern is a distribution to an adult child on a low rate where the money never leaves the parents' control. The ATO's guidance sets out its risk zones and it is worth reading if that describes your arrangement.
The Bendel decision changes the analysis for corporate beneficiaries. The High Court held on 10 June 2026 that an unpaid entitlement to a corporate beneficiary is not automatically a Division 7A loan. That does not make everything safe, and it does not mean existing loan agreements should be abandoned. It does mean the conversation about your 30 June resolution is different from the one you had last year, and it is worth having early rather than in the last week of June.
The practical advice
Diarise a meeting for the first week of June, not the last. Bring the deed. Have a realistic estimate of the year's income. Decide, document, sign, and file it with the deed rather than in a folder somewhere.
It is an hour of work that determines the tax outcome for the whole year, and it is the single most common thing done badly in small business tax.