Apr 10

Trust Distributions – Who can you distribute to?

Posted by Peter Marmara-Stewart at Wednesday, April 10, 2019

If you are a small business who uses a Trust, there are a number of people that you can distribute to with a Discretionary Trust.

These include:

- Children
- Parents
- Parents-in-law
- Brothers & Sisters
- Grandparents
- Grandchildren

Children & Grandchildren

You can distribute only $416 to children who are minors. That might not seem like a lot, but if you have 3 children and you are in the 47% tax rate, that works to being $586.56 in tax savings.

If you have children who are over 18 and are studying at University, or are not really earning an income, you can distribute up to $21,600, and they will not pay any tax. At the 47% tax rate, that is $10,152 in tax savings. If we increase that to $37,000, they will have to pay $3,667 in tax, and your net tax savings will be $13,723.

Brothers & Sisters

If you have brothers and sisters who are studying at University, or are not really earning an income, you can also distribute to them in a similar fashion as demonstrated above. Just make sure no one else is doing the same thing!!

Parents, Parents-in-law & Grandparents

If you have parents, parents-in-law and/or grandparents who are self-funded, you might be able to distribute to them in a tax effective manner.

How do you take advantage of this?

You need to have a Discretionary Trust with income, and you need to be a small business.


Do I need to pay the distribution?

Yes, you will need to pay the distribution.

What if they receive Centrelink?

If the people you are looking to distribute to receive Centrelink, then this strategy is unlikely to work for you.