Trust distribution resolutions: what your 30 June document actually has to say

Technically reviewed 8 October 2026 · General information only, not personal advice. Read our disclaimer.

So, every June a chunk of the country’s discretionary trusts produce a piece of paper called a trustee resolution, and a meaningful share of those resolutions don’t actually do what their authors think they do. Wrong beneficiaries named. Streaming clauses that don’t engage because the deed doesn’t permit them. Default clauses quietly catching a year’s worth of profit and assessing it at the top marginal rate. Resolutions signed on 12 July, dated 28 June, and not worth the paper they’re printed on.

This piece is the conversation I have with clients in May. What the resolution has to actually say. What the deed has to actually allow. Where the s 100A risk sits inside each clause. And what a properly prepared 30 June document looks like by the time it lands on a trustee director’s desk.

A note before we start. If you have a discretionary trust and you make distributions every year, the trustee’s decision is what converts beneficiaries’ names on a deed into actual present entitlements, and the written resolution is the evidence of that decision: the usual form, the safest form, and in many deeds the required form. It is the single most consequential piece of compliance paperwork in a trust’s year, and most of the cost of getting it wrong is invisible until something forces a review.

The deed is the boss

Before anything else, the resolution has to do what the trust deed allows it to do, in the form the deed requires, by the date the deed specifies.

The default tax rule under s 97 of the ITAA 1936 is that a beneficiary is taxed on income to which they are presently entitled at the end of the income year. The default backstop, where no beneficiary is presently entitled, is s 99A, which assesses the trustee at the top marginal rate plus levies on the undistributed amount. The job of the resolution is to make at least one beneficiary presently entitled (and usually several, in a chosen mix) before midnight on 30 June, so that the s 97 path is engaged and the s 99A path is closed.

That much is uniform. Where it stops being uniform is the deed. Some deeds require the trustee to make a determination by 30 June. Some require it earlier, and an earlier deed deadline binds. A handful purport to allow it later (rare, but real), which does not extend the tax law’s requirement that beneficiaries be presently entitled by the end of the income year; for an ordinary June year-end trust we work backwards from 30 June and check whether the deed wants it sooner. Some require streaming clauses to be invoked specifically. Some require the resolution to be in writing. Some allow a verbal resolution recorded in minutes after the fact. Some prescribe a particular form. Most older deeds were drafted before TR 2022/4 and PCG 2022/2 existed and don’t anticipate the streaming and substantiation language we now use as standard.

The first job is to read the deed, not the precedent template. We have inherited more than one client engagement where the previous accountant’s resolution had been reused word-for-word from a 1998 deed onto a 2014 trust with materially different powers. Some of those resolutions were operating, others weren’t, and nobody had checked.

Fixed amounts, proportions, and what “specific entitlement” actually means

The next decision is the framing of the distribution itself.

A fixed-amount resolution names beneficiaries to dollar amounts of trust income: “$50,000 to Beneficiary A; $30,000 to Beneficiary B; the balance to Beneficiary C.” A proportionate resolution names beneficiaries to fractions or shares of trust income before the income is finally calculated: “50% to Beneficiary A; 30% to Beneficiary B; 20% to Beneficiary C.” Neither is automatically right, and neither, on its own, determines the tax result. One point of vocabulary before going further: “specific entitlement” is not simply another name for a fixed-dollar distribution. It is a technical term from the streaming rules, with its own requirements, and it is dealt with below.

Two things follow from that choice. The first is that a $50,000 distribution does not necessarily mean the beneficiary is taxed on $50,000. The income available to distribute under the deed can differ from the income the tax return reports, and since the High Court’s decision in Commissioner of Taxation v Bamford [2010] HCA 10 each beneficiary is generally taxed on their share of the trust’s taxable income in proportion to their share of the distributable income, whichever way the resolution is worded (capital gains and franked dividends that are properly streamed are dealt with separately). We check both numbers, and make sure the resolution deals with the whole amount available for distribution, so nothing is left to the default clause by accident. The second is streaming. Specific entitlement, as the term is used in Subdivision 115-C and Subdivision 207-B of the ITAA 1997, requires the beneficiary to be entitled to a specific amount of the relevant capital gain or franked distribution, recorded in the trustee’s records by the relevant deadline (s 115-228 sets the capital-gains deadline at two months after the end of the income year, that is 31 August; s 207-58 sets the franked-distribution deadline at the end of the income year, that is 30 June), in a way the deed permits.

In practice, most resolutions we draft use a hybrid: specific entitlements to particular amounts of capital gains and franked dividends (where streaming is intended), and a proportionate distribution of the residual balance of trust income. That structure handles the Bamford gap, captures the streaming benefit, and avoids the silent default trap.

Streaming franked dividends and capital gains

If the trust has received a franked distribution and the trustee wants the franking credits to follow the cash to a particular beneficiary, the resolution has to engage Subdivision 207-B. If the trust has realised a capital gain (especially a discount capital gain) and the trustee wants the gain to flow to a particular beneficiary at their CGT rate, the resolution has to engage Subdivision 115-C.

The mechanics in both cases are the same in shape: the resolution must specifically entitle the chosen beneficiary to a specific amount or specific share of the relevant franked distribution or capital gain, recorded in the trustee’s records by the relevant deadline, in a way the deed permits.

The two things that go wrong here, often:

The deed doesn’t permit streaming. Older deeds drafted before the streaming amendments in 2011 sometimes don’t allow the trustee to deal with components of trust income separately. If the deed only authorises a distribution of “the net income” as a whole, the streaming clause in the resolution doesn’t engage and the franking credits and discounted capital gains end up flowing on a proportionate basis instead of in the targeted way the trustee intended.

The streaming clause is there but the records don’t do the job. The records need to say what benefit the beneficiary is entitled to, and connect it to the relevant gain or franked distribution. A properly worded resolution can form part of those records; simply allocating “the franking credits” or a dollar figure with no link to the gain or dividend does not.

If you’re streaming and you’re not sure your deed permits it, the answer is to read the deed, not to assume. If the deed lacks the power, the fix is a deed amendment prepared by a trust lawyer, with the resettlement, duty and validity questions answered before it is signed. Operating a streaming clause that the deed doesn’t allow gets you a trust-wide proportionate flow you didn’t intend, and where the franking credits and capital gains land then depends on the deed and the facts rather than on the plan.

Where section 100A meets the resolution

The resolution is also where s 100A risk lives in document form.

Section 100A treats a beneficiary’s entitlement as never having been made if it arose under (or in connection with) a reimbursement agreement, with the consequence that the trustee is taxed at the top rate under s 99A on the amount instead. The carve-out in s 100A(13) for “ordinary family or commercial dealing” is what most legitimate distributions rely on. The risk-zone framework in PCG 2022/2 sorts compliance attention across white, green and red zone fact patterns. We covered the rule itself and the zones in our plain-English Section 100A piece. Go there if you want the depth.

What this means for your resolution: the document is the visible step in a sequence the ATO will read backwards from cash flow. The resolution names the beneficiary; the cash either follows or it doesn’t; if the cash doesn’t follow the paper, the dealing has to be capable of being characterised as ordinary family or commercial dealing. The resolution itself doesn’t fix a red zone fact pattern, but a poorly drafted resolution makes a defensible fact pattern look worse than it is. A clean resolution, paired with cash that follows, is the easiest case the ATO will see.

The practical move on resolution night: where you’re distributing to lower-rate beneficiaries who are family members of higher-rate beneficiaries, the resolution should record the genuine reason, the resolution must actually exercise discretion (not be a pro-forma “to all default beneficiaries equally”), and the cash flow needs to be matched within a reasonable period afterwards. None of that is technical. All of it shows up on review.

The default beneficiary clause and the silent failure

The single most expensive resolution failure I see isn’t a wrong streaming clause or an aggressive distribution. It’s a missing one.

Most discretionary trust deeds contain a default beneficiary clause. If the trustee fails to make a determination of present entitlement before 30 June, the trust income falls automatically to the default beneficiaries in the proportions the deed specifies. The clause is usually a safety net, but it is a safety net the trustee has chosen the structure of in advance, and it can land badly. The default beneficiaries might be the parents (top marginal rate). The default beneficiaries might be a non-resident family member, triggering trustee assessment under section 98 of ITAA 1936. (The foreign resident capital gains withholding rules are a separate regime that turns on what is being sold, not on who the default beneficiary is, and are tested on the transaction.) The default beneficiaries might be a beneficiary who has died and not been removed from the deed.

Worse: in a small number of older deeds we’ve seen, there is no default beneficiary clause and a missed resolution drops the income straight into s 99A trustee assessment at the top rate.

The short version: a missed resolution is sometimes a 47% problem. The resolution is what stops that.

What a properly prepared resolution looks like

By the time we hand a resolution to a trustee director for signature, it has been through a sequence:

The deed has been read and the relevant trustee powers, streaming clauses, and required form confirmed. The trust’s net income for the year has been estimated. Provisional decisions on which beneficiaries receive what have been made, with their marginal rates checked and the s 100A position considered for each. Streaming entitlements have been quantified. The resolution has been drafted in the form the deed requires, naming specific entitlements where streaming is intended and a proportionate distribution of the residual. It has been dated for execution before 30 June, and the trustee director knows what they are signing.

The cash flow plan has been agreed alongside it. We don’t draft a resolution in May or June without knowing where the cash is going to physically end up. This is our own discipline rather than a legislative requirement, and it’s the part that converts a defensible piece of paper into a defensible fact pattern when the ATO reads the cash trail backwards.

A resolution drafted in May, executed before 30 June, with a cash plan attached, is almost never the resolution that fails on review. The resolutions that fail are the ones drafted on 5 July to a 28 June date.

If your trust is making distributions this year and you’re not sure your resolution and cash plan are doing what you think they are, ring us. Trust resolution work is dense in May and early June, and the cleanest engagements are the ones we start in April. The conversation costs you nothing, and it’s the cheapest insurance available against the slowest, most expensive class of ATO assessment we see.

Raise higher.