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Trust Distributions – Who can you distribute to?

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 49% tax rate, that works to being $611.52 in tax savings.

If you have children who are over 18 and are studying at uni or are not really earning an income, you can distribute up to $20,542 and they will not pay any tax. At the 49% tax rate, that is $10,066 in tax savings. If we increase that to $37,000, they will have to pay $3,456 in tax and your net tax savings will be $14,674.

Brothers & Sisters

If you have brothers and sisters who are studying at uni or are not really earning an income, you can also distribute to them in a similar fashion as 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.

FAQ’s

Do I need to pay the distribution?

Yes, you will need to pay the distribution.

What if they receive Centrelink?

If who you are looking to distribute to, receives Centrelink, then this strategy is unlikely to work for you.