Trust Accounting, Setup and Distributions
Establishment and annual administration of family, discretionary and unit trusts — accounts, distribution resolutions and trust returns, done in the right order.
Trusts are unforgiving about process. A trust is governed by its deed, and the deed determines who can benefit, what the trustee is permitted to do, and how income must be dealt with. Where the paperwork does not follow the deed, or resolutions are made after the fact, the consequences fall on real people — typically as an unexpected tax outcome for a beneficiary who thought the matter was settled.
The annual cycle has a rhythm that cannot be rearranged. The trust’s accounts have to be prepared so the trustee knows what income there is to distribute. The trustee then needs to make and document a distribution resolution, generally before the end of the income year on 30 June. Only afterwards does the trust return get prepared, reporting distributions that have already been validly made. Doing that sequence backwards in September is the single most common problem we see.
What trust administration covers
- Trust establishmentSetting up the trust with an appropriate deed and trustee arrangement, and completing the registrations the trust needs.
- Annual trust accountsPreparation of the trust’s financial statements, so trustee decisions are made against known figures rather than estimates.
- Distribution resolutionsPreparing the resolution documentation the trustee needs, in time to be made and signed within the income year.
- Trust tax returnLodgement of the trust return, reporting distributions consistently with the resolutions actually made.
- Beneficiary statementsDistribution statements for each beneficiary, so their own returns can be prepared without guesswork.
- Deed and record reviewChecking that what is being done is actually permitted by the deed, and that the trust’s records support it.
Who this suits
Family trusts. Where a discretionary trust holds a business or investments and needs its annual cycle handled properly and on time.
Unit trusts. Where fixed entitlements exist between unrelated parties and the accounting has to reflect unit holdings accurately.
Trustees who have fallen behind. Where resolutions were missed, records are incomplete, or nobody is certain what the deed actually permits.
The annual cycle
Review the deed
What the deed permits governs everything else, so it is read before decisions are documented rather than after a question arises.
Prepare the accounts
The trust’s income and position are determined, so the trustee can make a distribution decision based on real figures.
Resolve and document
The trustee’s distribution resolution is prepared and documented within the income year, generally before 30 June.
Lodge and report
The trust return is lodged and beneficiaries receive the statements they need for their own returns.
Where a trust is being established as part of a wider structure, the entity registration side is covered under company registrations and structures — corporate trustees are common. Beneficiaries then report their distributions in their own returns, prepared under taxation services. Testamentary trusts, which come into existence under a will, begin life inside an estate and are picked up under deceased estate returns.
Works well with
Common questions
Why does the timing of a distribution resolution matter so much?
Can a trust distribute to whoever the trustee chooses?
Do trusts have to lodge their own tax return?
Speak to a chartered accountant
Tell us what you need and we’ll let you know whether we can help, what it involves and what it costs — before you commit to anything.