The ATO is cracking down on family trust distributions in 2023

Welcome to 2023! I hope it’s a great year for you.

This year the ATO is promising to crack down hard on family trust distributions to individuals and entities that don’t actually benefit from that income.

In other words, the children of business owners in most cases.

In order for a distribution to be considered legitimate by the ATO it needs to satisfy a commercial or family outcome.

In the case of distributions to children, “tax minimization” isn’t considered a legitimate outcome. These sorts of distributions will likely attract the ATO’s attention.

Where the ATO sees a distribution as invalid, they will proceed to tax the trustee of the trust at a whopping 47%.

Fortunately, the ATO has provided guidance with clear examples of distributions that are considered low risk.

As always, if you need help sifting through it, don’t hesitate to get in touch.