Taxpayers may be considering whether they should make a family trust election (‘FTE’) for a trust, or an interposed entity election (‘IEE’) for a trust or other entity.

Making an FTE provides access to certain tax concessions (assuming the relevant tests and conditions are satisfied), although there are important things to consider.

In particular, once the election is in effect, family trust distribution tax (‘FTDT’) is imposed when distributions are made outside the family group of the ‘specified individual’. FTDT is a 47% tax, payable by a trustee, director, or partner, as the case may be (depending on the entity).

Taxpayers should review FTEs and IEEs annually to ensure they remain appropriate. Taxpayers can only revoke or vary FTEs and IEEs in limited circumstances and subject to certain conditions.

Before making a distribution or annual trust resolutions, trustees should identify the members of the specified individual’s family group. This will help avoid FTDT liabilities.

Editor: Please contact our office if you require any assistance in this regard.

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