Trust Distributions from a Discretionary Trust

Article from The Outlook, published Issue #3 November/December 2019

What is a trust?

A trust is best described as a legal relationship that is controlled by the trustee of the trust under the terms of the trust deed. A trust is not a legal entity, if you are wondering.
The purpose of a trust is to seperate between the legal and beneficial ownership of an asset. The legal ownership is held by the trustee and the beneficiaries will benefit from the income that flows from the assets. 

Who are the trustee? And what are their roles?

A trustee can be an individual or a group of individuals. An entity, such as a company can also be a trustee. But, they are only the legal owner of the assets, not the beneficial owner. 

The duties of a trustee is to administer the trust for the benefits of the beneficiaries. The trustee must only act in accordance with the trust deed and the relevant trust legislation.

Who are the beneficiaries?

The beneficiaries are those who will profit from the income and capital of the trust. Beneficiaries can be an entity or an individual. Most of the time, there are the primary beneficiaries that is defined in the trust deed, and the other beneficiaries will be related or connected to the primary beneficiaries.

What is a Trust Deed?

Trust deed is a legal document signed by the creator of the trust, called the settlor. In the trust deed there is instructions for the trustee regarding how the trust is to be administered and what activities the trust can engage in. 


Appointor is a very important part of a trust, they are the individuals that appoint the trustee and they can also change the trustee. 

Distribution Minute

By 30 June each year, the trustee must determine the distributable income of the trust. The trustee must then decide how the distributable income is to be distributed between the beneficiaries. 


Income that is being distributed to adult beneficiaries and beneficiaries that are entities are taxed to those beneficiaries. 

 The trustee is taxed on income distributed to the child beneficiaries.  They are also often taxed at the top marginal tax rate, if there is income of the trust that has not been distributed to the beneficiary. 

Read the full article including the Trust Distribution Flowchart in PDF format, fill out the information below to let us know where to send it to.




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