April and May are the time to start thinking about who will receive income from your family trust this year and how much. This decision must be made before 30 June, and the deadline is firm. Getting it right can save your family a significant amount of tax. Getting it wrong, or leaving it too late, can be very costly.

How does a trust get taxed?

Under Australian tax law, trust income is taxed once either the trust pays the tax itself, or the family members who receive the income pay it. The good news is it’s never taxed twice.

The problem is that when the trust pays the tax itself, the rate is 47 cents in every dollar. That’s very high. In most cases, it makes far more sense to distribute the income to individual family members, who typically pay tax at a lower rate.

Who should receive the income?

The simple answer is: the people in your family who pay the least tax. If one family member earns very little for example, an adult child who is studying, or a spouse who isn’t working full time they may pay a much lower rate of tax on the same income.

The government is well aware of this strategy and has put strict rules in place to stop people from putting income in someone’s name without that person actually receiving or benefiting from the money.

The distribution needs to be genuine.

Sometimes paying the higher rate actually makes sense

Every now and then, we might recommend leaving some income in the trust even though it will be taxed at 47%. This can happen when distributing more income to a particular person would push them over a threshold, costing them more in other ways.

We always look at the full picture for each family.

The 30 June deadline is absolute

All decisions about who receives the trust’s income must be made and signed off before 30 June. The law gives no flexibility on this. Waiting until you drop off your tax paperwork after year end is too late.

We need to connect before year end, estimate the numbers, and get the right documents in place before the financial year closes.

How we work through this with you

We sit down with you, estimate what each person in your family is likely to earn this year, and what the trust’s income is expected to be. We don’t need exact figures a reasonable estimate is enough. From there, we prepare the paperwork that legally distributes the income in the most tax-effective way possible.

Contact us this month to get your trust distributions sorted before the deadline.

t: +61 7 3177 4120
e: advisors@hksrussell.com

Posted on April 14, 2026 by Charisse Russell - Articles