Making an Election
Family Trust Election is made by the Trustee of the Trust to specify the ‘test individual’. From this ‘test individual,’ the family group is determined to restrict who can receive distributions without triggering Family Trust Distribution Tax. This tax is payable at the top marginal tax rate where a distribution is made to a party that is not a member of the family group.
A Family Trust Election is usually made in the following circumstances about the Trust:
- Trust Loss measures;
- A Company loss tracing concession;
- Franked dividends and the holding period rule;
- Exclusion from the Trust Beneficiary Rules (TBR);
- Small Business Restructure Roll-over.
This document will provide the resolutions supporting the making of the election. The ‘approved form’ will need to be lodged with the ATO.
To start this process, you will need to navigate to Menu > Trust Register > Trusts > open the Trust Profile > "Trust Elections" > select "Make a Trust Election"
You will then be redirected to the relevant webform, to which the form will be pre-filled with the relevant data that has currently been added or imported into the Trust Profile of the Trust. You will need to complete any data that has not been pre-filled. These data fields will be highlighted in pink. You cannot submit the webform until all relevant data fields have been completed.
Tip: If the election is being made in respect of an earlier year of income, the specified individual’s date of birth (see ‘Specified Individual’ tab) must be on or before the beginning of the income year specified for the commencement of the Family Trust Election.
Once 'Income year specified' is selected, 'Election commencement date' is automatically pre-filled with 01/07 of the year selected as income year.
Important: As part of the election and validation process, you will also be asked to acknowledge the following two questions:
- The Trust passes the Family Control Test under section 272-87 of Schedule 2F of ITAA 36.
- Any conferrals of present entitlement to or any actual distributions of, income or capital of the Trust during that period have been made on or to the test individual specified in the election or members of that individual's family group
Both tick boxes are required to be ticked to move onto the next page.
- Tip: The ‘Specified Individual’ is the individual whose family group is taken into account in the election. The specified individual has no additional rights or responsibilities and does not need to be directly associated with the Trust. The specified individual must also be alive at the time the election is made. Must also be over 18 years old and the specified individual’s date of birth must be on or before the beginning of the income year specified for the commencement of the Family Trust Election.
After submitting the details, the relevant documentation will appear on the ‘collaboration page’ i.e.:
- 'Trustee/Director Resolution' document - signed by all Trust Trustees/Directors
Varying an Election
Family Trust Election is made by the Trustee of the Trust to specify the ‘test individual’. From this ‘test individual,’ the family group is determined to restrict who can receive distributions without triggering Family Trust Distribution Tax. This tax is payable at the top marginal tax rate where a distribution is made to a party that is not a member of the family group.
A Family Trust Election can be varied in specific circumstances.
The ‘specified individual’ in a Family Trust Election can be varied where:
- the new individual was a member of the family of the originally specified individual at the election commencement time;
- no conferrals of present entitlement to, and distributions of, income or capital have been made (by the Trust or an interposed entity) outside the new specified individual’s family group during the period in which the family Trust election has been in force, and
- the Trust meets the related conditions in subsections 272-80(5A), (5B), (6B) and (8) of Schedule 2F to the ITAA 1936 which includes specific time periods during which the specified individual in a family Trust election can be varied.
This document will provide the resolutions supporting the making of the election. The ‘approved form’ will need to be lodged with the ATO.
To start this process, you will need to navigate to Menu > Trust Register > Trusts > open the Trust Profile > "Trust Elections" > select "Vary a Trust Election"
You will then be redirected to the relevant webform, to which the form will be pre-filled with the relevant data that has currently been added or imported into the Trust Profile of the Trust. You will need to complete any data that has not been pre-filled. These data fields will be highlighted in pink. You cannot submit the webform until all relevant data fields have been completed.
You will be asked to input details of the original ‘specified individual’ as well as the new ‘specified individual’.
Important: Variation of an election can only be done once. You will be asked to following questions on the ‘Variation’ webpage:
- Date of Original Election
- Income Year Specified
- Is the Variation due to order, agreement or award?
After submitting the details, the relevant documentation will appear on the ‘collaboration page’ i.e.:
- 'Trustee/Director Resolution' document - signed by all Trust Trustees/Directors
Revoke a Trust Election
Family Trust Election is made by the Trustee of the Trust to specify the ‘test individual’. From this ‘test individual,’ the family group is determined to restrict who can receive distributions without triggering Family Trust Distribution Tax. This tax is payable at the top marginal tax rate where a distribution is made to a party that is not a member of the family group.
There are certain circumstances when you can revoke a Family Trust Election. These circumstances are as follows:
The Trustees of a Trust may revoke a family Trust election where:
- the family Trust is a Fixed Trust at the beginning of the specified year and the Trust satisfies all the other conditions set out in subsections 272-80(6) and (7) of Schedule 2F to the ITAA 1936, or
- under legislative changes that took effect on 1 July 2007
- at any time while the election was in force, the Trust, or another entity, has not recouped a tax loss or claimed a deduction for bad debts, or a Beneficiary of the Trust has not received a franked distribution indirectly through the Trust in relation to which the Beneficiary was entitled to franking credits, only as a result of the election being in force, and
- the Trust must also satisfy the related conditions in subsections 272-80(6A), (6B) and (8) of Schedule 2F to the ITAA 1936 which includes specific time periods during which a family Trust election can be revoked in this situation.
This document will provide the resolutions supporting the making of the election. The ‘approved form’ will need to be lodged with the ATO.
To start this process, you will need to navigate to Menu > Trust Register > Trusts > open the Trust Profile > "Trust Elections" > select "Revoke a Trust Election"
You will then be redirected to the relevant webform, to which the form will be pre-filled with the relevant data that has currently been added or imported into the Trust Profile of the Trust. You will need to complete any data that has not been pre-filled. These data fields will be highlighted in pink. You cannot submit the webform until all relevant data fields have been completed.
You will be asked to disclose the ‘specified individual’ whose family group is to be taken into account in relation to the revocation of the election.
Important: You will be asked to complete the following details on the ‘Revocation’ webform:
- Date of Original Election
- Income Year Specified
- Date of Revocation. This date should not be outside of 5 years from the beginning of the ‘Income Year Specified’.
After submitting the details, the relevant documentation will appear on the ‘collaboration page’ i.e.:
- 'Trustee/Director Resolution' document - signed by all Trust Trustees/Directors.