Family Trusts Under the Microscope
Why Now Is the Time to Review Yours
Over the past three decades, the rules governing Family Trusts have grown increasingly complex. Today, the Australian Taxation Office (ATO) is taking a far more assertive stance—scrutinising trust arrangements with a level of detail we haven’t seen before.
Current ATO focus includes:
- Validity of Family Trust Elections (FTEs)
- Correct identification and use of the “test individual”
- Whether distributions are being made to beneficiaries within the designated family group
This isn’t just theoretical. Prominent legal firms have raised concerns about widespread technical breaches—often inadvertent—that could expose families to serious financial consequences.
What This Means for You
If you’re a trustee or advisor, this shift in ATO attention is more than a compliance issue—it’s a potential threat to long-term family wealth.
Family Trust Elections, once considered routine, are now under the spotlight. And the implications are real:
- Families are facing unexpected tax bills for historical distributions
- Back taxes, interest, and penalties are being applied
- In some cases, individuals are being held personally liable
This is especially critical in scenarios involving succession planning, intergenerational wealth transfer, or the sale of a business—where trust structures must be airtight.
Why a Review Is Essential—Even If Your Trust Seems Fine
Many trusts haven’t had their elections reviewed in over a decade. Some never made elections at all. And due to limitations in the ATO’s tax agent portal, even well-intentioned trustees may be unaware of gaps in their compliance.
Even newer trusts aren’t immune. If your trust generates tax losses or franked income, the rules around elections are particularly nuanced—and easy to misstep.
The bottom line:
What was once standard practice may now be non-compliant. A proactive review could be the difference between preserving wealth and facing costly penalties.
How Rose Partners Can Support You
We’re taking a proactive stance to help our clients stay ahead. Here’s how we can assist:
- Audit your current Family Trust Elections and Interposed Entity Elections
- Confirm the correct “test individual” and key dates
- Identify and fix outdated or incorrect elections
- Ensure distributions are made within the family group to avoid tax traps
- Document everything thoroughly—so you’re ready if the ATO comes knocking
- Keep your strategy aligned with evolving legislation and ATO guidance
Let’s Get Ahead of This—Together
We’ll be reaching out to discuss a tailored review of your trust’s tax election requirements. In the meantime, if you have questions or want to get started sooner, our team is here to help.
Protecting your family’s wealth starts with getting the details right. Let’s make sure your trust is working for you—not against you.
The team at Rose Partners
