If you have a family trust structure, you need to consider if it is appropriate to make a family trust election.
A family trust election (“FTE”) is a choice by a trustee to specify a particular individual (the test individual) around whom a family group is formed.
The family group formed as such then sets the maximum range of beneficiaries amongst whom the trustee can distribute income without triggering significant adverse tax outcomes, such as family trust distributions tax.
The making of an FTE will enable the trustee to pass franking credits on to beneficiaries and more easily offset prior year losses against the trust’s taxable income.
The choice as to who will be the test individual is crucial, as not all family members will be part of the ‘family group’ for tax purposes.
If your family trust receives franked dividends or has tax losses, the trustee should consider the option of making a family trust election (FTE) in order to access certain tax concessions.
However, FTE may not be appropriate in all instances there may be the risk of incurring FTDT if a distribution is made to a beneficiary outside of the family group.
If you have any questions about family trust elections, please contact us.
Disclaimer: This article is provided as general information only and does not consider your specific situation, objectives, or needs. It does not represent accounting or tax advice upon which any person may act. Implementation and suitability require a detailed analysis of your specific circumstances. Before taking any action, consider your own circumstances and seek professional advice.