The 2026 Federal Budget has created genuine uncertainty for anyone who advises on or benefits from a discretionary trust. The proposed 30% minimum tax on trust distributions to adult beneficiaries, changes to the CGT discount, and new restrictions on bucket companies have left many of us wondering whether the rules of the game are about to change fundamentally.
They may well be. But none of those changes are law yet, and they won’t affect the current financial year. What has not changed is the obligation that every trustee of a discretionary trust faces right now: exercising the trustee’s discretion to distribute income before the end of the income year.
Whatever the future holds for trust taxation, the deadline to act for the 2025-26 year is 30 June. Missing it doesn’t defer the problem; it creates a new and immediate one.
This article explains what distribution minutes are, what they need to cover, and why getting them right (and on time) matters more than ever.
What are trust distribution minutes?
Distribution minutes (otherwise referred to as a trustee resolution) are the written record of a trustee’s decision about how a discretionary trust’s income will be allocated among its beneficiaries for the financial year.
The trustee of a discretionary trust has the power to decide each year which beneficiaries receive income, and in what proportions. That decision is not automatic. It must be actively exercised, and it must happen before midnight on 30 June.
The minutes serve two purposes. First, they create the legal entitlement: a beneficiary is only ‘presently entitled’ to trust income once the trustee has resolved to distribute it to them. Second, they are the primary evidence that the decision was made on time — which the ATO can and does examine.
Why is 30 June a hard deadline?
The 30 June deadline is not a guideline or a best practice. It is the statutory cut-off.
Under the tax law, a beneficiary can only be assessed on their share of the trust’s taxable income for a year if they were made “presently entitled” to that income by the end of that income year. If no valid resolution exists by 30 June, the trust’s taxable income will typically be assessed in the hands of the trustee at the top marginal rate of 45%, plus the Medicare levy.
Previously, the ATO allowed a two-month grace period following the end of the financial year, under its IT 328 and IT 329 guidance. That concession has been withdrawn. There is no safety net.
The ATO has also become increasingly active in scrutinising the timing of resolutions, not just their content. A resolution dated 30 June but prepared weeks later and backdated may be rejected as invalid. This was illustrated in the 2025 Administrative Review Tribunal decision in The Trustee for Goldenville Family Trust v Commissioner of Taxation [2025] ARTA 1355 (Goldenville), where the trustee’s resolution was disregarded because the evidence suggested it was prepared retrospectively, after the financial statements were completed. The income was reassessed to default beneficiaries at top marginal rates.
The ATO has clarified its position on records created after 30 June here.
The lesson is clear: the decision must be made before 30 June, and there must be comprehensive evidence and documentation that it was.
What should distribution minutes cover?
A valid and effective set of distribution minutes is more than a document listing who receives what. There are a number of substantive decisions the trustee needs to document for each income year. These include:
How “trust law income” is defined for this year
“Trust income” for tax purposes is not always the same as the trust’s accounting profit. Your trust deed will typically define how income is calculated for the purposes of distributions. Getting this right is foundational, because it determines how much income there is to distribute, and to whom.
Whether to align trust law income with taxable net income
Trustees may choose to exercise a discretion (if the relevant trust deed permits) to define trust income on the same basis as the ATO’s concept of “net income.” This alignment can simplify the tax treatment for beneficiaries and avoid mismatches between what beneficiaries are entitled to and what they are actually assessed on.
To learn more about these concepts, read chapter 2 of our trust distributions guide here.
Whether to stream specific categories of income
Subject to what the trust deed allows, tax law permits trustees to “stream” specific types of income (most commonly capital gains and franked distributions) directly to particular beneficiaries. This can be a powerful planning tool. For example:
- A beneficiary with prior-year capital losses might be the ideal recipient of a capital gain
- A beneficiary who can best utilise franking credits might be allocated franked dividends
Streaming must be done in accordance with the law and relevant trust deed. At minimum, it requires a written resolution specifically attributing the relevant income category to the nominated beneficiary, and the beneficiary must be made “specifically entitled” to it. For capital gains, there is actually a separate 31 August deadline for specific entitlement, but any capital gains already dealt with in the 30 June resolution are locked in at that point.
Nominating a default or “balance” beneficiary
Even the most carefully drafted resolution may leave some residual income undistributed. For example, if the trust is audited and additional taxable income is identified that wasn’t known at the time of the resolution. Nominating a default beneficiary to receive any such balance prevents that amount from falling back to the trustee and being taxed at the top marginal rate.
The above are examples of common issues we have seen, but each trust’s circumstances are different. Trustees should seek appropriate advice on the preparation of distribution minutes to ensure that they are documented appropriately.
Can a resolution be backdated?
No. This is one of the most common and costly misconceptions in trust administration.
Goldenville reinforced that even a document dated 30 June can be rejected if the surrounding evidence such as the document being prepared after the financial accounts were finalised, suggests it does not reflect a genuine concurrent decision.
Practical implication: If you want your resolution to be defensible, you need to be able to demonstrate that the decision was actually made on or before 30 June. That means keeping records such as email correspondence, meeting invites, adviser communications, or drafts circulated before the deadline.
Common mistakes trustees make
Signing after 30 June: By far the most common issue. Even a few days matters. There is no tolerance.
Failing to define trust law income: If your trust deed allows a different definition of income, not addressing this in the resolution can create mismatches with your tax return.
Not addressing capital gains streaming: If the trust has significant CGT events for the year and streaming is not dealt with in the minutes, the opportunity to direct gains to the most appropriate beneficiary may be lost.
Not nominating a default beneficiary: Leaving this open creates risk if the trust is later assessed on income that wasn’t anticipated when the resolution was made.
Using a generic template without reviewing the trust deed: Distribution minutes must be consistent with the terms of your specific trust deed. A generic resolution may not be valid if it doesn’t align with the deed’s definitions, powers, or timing requirements. Some trust deeds require resolutions to be made before 30 June, which brings the deadline forward further.
Not considering Section 100A: Where income is distributed to a beneficiary but the economic benefit is intended to flow elsewhere (for example, to parents via distributions nominally made to adult children), the ATO may invoke Section 100A of the Income Tax Assessment Act 1936 (Cth). This is an area of heightened ATO attention. Distributions should reflect genuine family or commercial dealings.
What about capital gains — is 31 August still relevant?
Yes, with important nuance.
The 31 August deadline applies specifically to making a beneficiary “specifically entitled” to a trust capital gain through an appointment of trust capital in the trust’s books. If this has not already been dealt with in the 30 June resolution, there is technically a window until 31 August.
However, if you have already addressed capital gains in the 30 June minutes, those allocations are locked in. And in any event, leaving CGT streaming to August, when income distributions must be resolved by June, creates coordination risk. The better approach is to deal with both at the same time, before 30 June.
How we can help
Distribution minutes need to be carefully prepared to reflect your trust deed, your tax position, and your beneficiaries’ circumstances for the year. A generic resolution that doesn’t engage with these issues may be technically deficient or may simply fail to deliver the tax outcome you were counting on.
If you need assistance to prepare your trust distribution minutes prior to 30 June, and to make sure those minutes deal with the issues above, call ADLV Law on 1300 654 590 or email us.
You can also download a copy of our Trust Distributions Guide here.
The information contained in this post is current at the date of editing – 09 June 2026.
