TaxSmart Cafe - Wyndham

If you are a trustee of a discretionary (family) trust, this post is critically important. Under Australian tax law, a trust's net income must be distributed to beneficiaries by June 30 each year — and crucially, the trust resolution specifying how income is distributed must also be made by June 30.

If a valid distribution resolution is not made by midnight on June 30, the trustee will be assessed on the trust's net income at the top marginal rate of 45% (plus Medicare Levy). That's an extraordinarily expensive mistake that cannot be rectified after the fact.

What does a valid trust resolution look like? It must be in writing, specify the beneficiaries and the amount or percentage each will receive, be made by the trustee (or all trustees if there are multiple), and be dated no later than June 30. It must also comply with the trust deed — distributions must be made to valid beneficiaries as defined in the deed.

In recent years, the ATO has also focused on trust distributions to adult children and associates — particularly 'circular' arrangements and section 100A anti-avoidance provisions. If your trust distributes to beneficiaries who don't actually receive or benefit from the funds, the ATO may re-characterise those distributions.

With seven days to go, TaxSmart Cafe is processing trust resolutions urgently for clients. Contact us immediately if you haven't done this.

Tax losses occur when your allowable deductions exceed your assessable income in a given year. Rather than being written off entirely, tax losses in Australia can be carried forward and offset against future income — potentially saving you significant tax in a future high-income year.

Individuals can carry forward tax losses indefinitely. If your rental property produces a net loss that exceeds your other income, the excess loss is carried forward to future years. If your business makes a loss, that loss may also be available to offset future business or passive income (subject to non-commercial loss rules, which can restrict losses from activities not conducted in a genuinely commercial manner).

Capital losses are treated differently to income losses — they can only be applied against capital gains, not ordinary income. And they cannot be converted or mixed with income losses. However, they carry forward indefinitely and can be used to offset future capital gains.

For the 2025–26 year, if you're sitting on capital losses that have no gains to offset, consider whether there are any gains you could realise before June 30 to use the losses efficiently. Alternatively, assess whether there are strategies to maximise gains in a year when you have available capital losses.

TaxSmart Cafe tracks clients' carried-forward losses across years and ensures they're applied optimally in each return. Never let a carried-forward loss go to waste.