Family trust streaming and the 30 June resolution: the annual decision retiree trustees can't skip

For Australian retirees who are trustees of discretionary family trusts, June arrives with a specific compliance demand. Before 30 June, the trustee must resolve how the year's trust income and capital gains will be distributed among the discretionary beneficiaries. The resolution determines who is taxed on what, at what rate. A well-drafted resolution maps income to beneficiaries' tax positions in ways that minimise the family's aggregate tax bill. A poorly drafted or late resolution triggers default tax treatment — often the trustee taxed at the top marginal rate, with no opportunity to remediate. The annual rhythm is technical, but the principles are intuitive: among the family's beneficiaries, who can most efficiently receive each type of income? The answer is rarely the same person each year, because marginal rates change, beneficiaries' other income changes, and the year's investment outcomes change.

Trust law and tax law both require that the trustee's resolution to distribute be made before the end of the financial year. The relevant tax provision is Income Tax Assessment Act 1936 s.97 (https://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s97.html, accessed 6 May 2026), under which a beneficiary "presently entitled" to trust income at 30 June is taxed on that income for the year. The resolution must be in writing, dated, and effective on or before 30 June. The reasons are several: the trust deed typically specifies that beneficiaries are entitled to income only when the trustee resolves to make them so entitled; for tax purposes, present entitlement at 30 June drives the year's assessment; and if no resolution is made by 30 June, the default rule typically applies — often resulting in the trustee being taxed at the top marginal rate on undistributed income, or in default beneficiaries becoming entitled in ways that don't align with the family's planning. The deadline is real. A resolution drafted in July is too late. A resolution dated 30 June but actually composed and signed weeks later is vulnerable to challenge. The 30 June deadline must be respected as a substantive compliance requirement (ATO — your obligations as a trustee, https://www.ato.gov.au/businesses-and-organisations/trusts/trustees-and-beneficiaries/your-obligations-as-a-trustee, accessed 6 May 2026).

"Streaming" is the practice of attributing specific types of income to specific beneficiaries. Australian tax law accommodates streaming for capital gains and franked distributions in particular, with detailed mechanics set out in the ATO's streaming guidance (https://www.ato.gov.au/businesses-and-organisations/trusts/trustees-and-beneficiaries/streaming-trust-capital-gains-and-franked-distributions, accessed 6 May 2026). For franked dividends, Australian-listed shares paying franked dividends carry franking credits that effectively pre-pay 30% corporate tax. For a beneficiary in the 0% or low marginal bracket, the franking credits exceed their personal tax liability and the difference is refundable, so streaming franked dividends to a low-rate beneficiary can recover franking credits as cash refunds, recapturing tax that would otherwise be lost in the corporate-to-individual flow. For capital gains, long-held investments (12+ months held by an individual through the trust) attract the 50% individual CGT discount; for a beneficiary in a low marginal bracket, the post-discount tax on capital gains is relatively modest, so streaming gains to such a beneficiary minimises the tax cost of the realisation. Foreign source income often comes with foreign income tax offsets (FITO) that are generally non-refundable and can be used only against Australian tax liability — streaming foreign income to a beneficiary with sufficient other Australian tax allows full use of the FITO, while streaming to a low-tax beneficiary may waste the credit. Ordinary income — interest, rent, miscellaneous trust income — is distributed under general discretion to whoever is best positioned to receive it.

For a typical retiree family trust with the parent generation often on the Age Pension or low marginal rate and adult children in their working years (typically in 32% or 37% brackets at FY25-26 individual income tax rates, https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/payg-instalments-and-tax-tables/individual-income-tax-rates, accessed 6 May 2026), the streaming logic generally directs franked dividends to the parent (low marginal rate, franking credits refundable), capital gains to the parent (low marginal rate, 50% discount preserved), foreign income with FITO to an adult child (sufficient Australian tax to use the FITO), and ordinary income flexibly based on the year's specific marginal positions. The result, in a typical year, is that the family's aggregate tax bill is materially lower than if all income flowed pro-rata to all beneficiaries. The savings can be in the thousands or tens of thousands of dollars on a modest trust; for substantial trusts, the savings are larger.

For streaming to work, the trust deed must give the trustee the power to stream income types. Most modern deeds do; some older deeds (drafted decades ago) require pro-rata distribution of all income, defeating streaming. For a deed without streaming powers, an amendment may be appropriate — but with care, because trust deed amendments can trigger resettlement consequences, with deemed disposal of all trust assets at market value. Specialist legal and tax advice is essential before any deed amendment.

Most family trusts have made a Family Trust Election (FTE) — a one-time election that fixes the family group of the trust to enable certain tax benefits including loss recoupment and franking credit pass-through (ATO — family trust elections and distribution tax, https://www.ato.gov.au/businesses-and-organisations/trusts/trustees-and-beneficiaries/family-trust-elections-and-distribution-tax, accessed 6 May 2026). The FTE limits the eligible beneficiary class to the "family group" — broadly, the test individual, their spouse, parents, children, grandchildren, siblings, and certain related entities. Distributions outside the family group attract the family trust distribution tax at the top marginal rate, effectively a punitive rate around 47% including Medicare on the distribution. The streaming strategy must respect the family group definition.

A workable annual process for retiree trustees runs on a tight timeline. By mid-June, the trust's accountant prepares preliminary financial statements estimating the year's income and gains, and the trustee considers the family beneficiaries' projected tax positions for the year — particularly any unusual events (a child's redundancy, a parent's hospitalisation, a sale of a business). In late June, typically 25-28 June, the accountant proposes a distribution allocation supporting the family's overall tax outcome; the trustee reviews and approves; the resolution is signed and dated before 30 June; and the signed resolution is filed with the trust's records. From July onwards, the accountant finalises the trust's financial statements with actual figures, the trust distributes the income to beneficiaries (cash flows can occur after year-end where consistent with the resolution), and the beneficiaries declare their distributions on their personal tax returns.

What do worked strategy examples show?

These two cases show how the streaming framework lands differently depending on the year's investment events and the family's marginal-rate map. Illustrative only — not personal advice — using FY25-26 figures.

Case 1 — Helen, 71, retired widow, trustee of a long-running family discretionary trust. The eligible beneficiaries are Helen, her son Greg (49, full-time employed, $145,000 salary putting him in the 37% bracket), and her daughter Susan (47, recently moved to part-time after a redundancy, total taxable income for the year about $42,000). The trust holds a $1,200,000 share portfolio that paid $48,000 of fully franked dividends and realised a $40,000 long-term capital gain (post-50% discount: $20,000 assessable). Helen has $32,000 of other taxable income (modest super pension and term-deposit interest). On these facts, streaming franked dividends to Helen and Susan rather than Greg is generally rational because Helen's franking-credit refund recovers cash that would be lost if Greg, already at 37%, received the same income — and Susan's reduced earnings year places her at a low effective marginal rate where franking credits are also valuable. Streaming the capital gain to Helen preserves the 50% discount benefit at her low marginal rate. The resolution is drafted by 25 June, signed and dated before 30 June, and the signed copy filed with the trust's records (ATO trustee obligations guidance). The trap to avoid is leaving the resolution to the accountant's first-week-of-July tidy-up — a 1 July signature is too late, and the default rule under ITAA 1936 s.97 may then assess Helen as trustee at the top marginal rate on undistributed income.

Case 2 — David, 68, single retiree, trustee of a family trust with international exposure. The trust holds a $400,000 portfolio of US-listed shares paying $14,000 of foreign-source dividends, with $2,100 of US withholding tax creating a corresponding foreign income tax offset (FITO) under Australian rules. The trust also has a $20,000 fully franked dividend stream from Australian shares and a $30,000 long-term capital gain ($15,000 assessable after the 50% discount). The eligible beneficiaries are David, his son Robert (52, $180,000 salary, 47% bracket), and his daughter Norma (46, $95,000 salary, 32% bracket). David's other income is around $28,000. On these facts, the rational streaming directs the $14,000 of foreign dividends to Robert because his 47% Australian tax position fully absorbs the $2,100 FITO (which is non-refundable and would be wasted at David's lower bracket), the franked dividends and capital gain to David where the franking credits are refundable and the 50% discount lands at low marginal cost, and ordinary trust income flexibly between Norma and David depending on year-end positions. The trap is reflexively streaming everything to the lowest-rate beneficiary — non-refundable FITO is the counter-example, and routing it to the 47% bracket beneficiary preserves a credit that the 0%–19% bracket would lose. As with Case 1, the resolution must be signed before 30 June.

A few common pitfalls remain worth flagging. Late resolutions drafted in July but back-dated are vulnerable to ATO challenge and may attract default tax treatment. Generic resolutions that don't clearly identify streamed amounts and recipients may render the streaming ineffective. Streaming without deed support — where older deeds lack streaming powers — defeats the strategy. Forgetting the FTE constraint puts distributions outside the family group at the punitive family trust distribution tax. Single-year optimisation without considering multi-year impacts can produce sub-optimal outcomes — a streamed distribution affects the recipient's TSB for super planning, carry-forward losses, and other income tests. And for trustees in their 70s and 80s, the annual resolution process should be supported with adequate professional involvement, with succession planning (corporate trustee, younger co-trustee) preserving the trust's effectiveness as the trustee ages.

Family trusts are a legitimate and useful structure for Australian families with substantial wealth. Their annual streaming process is the moment when the structure earns its keep — when the trust's flexibility translates into genuine family tax savings. For retiree trustees, the discipline is straightforward: engage with the accountant by mid-June, map family tax positions, identify streaming opportunities, sign the resolution by 30 June. Done well, the process is one of the more consequential annual planning tasks. Done poorly, the trust's tax features are wasted — or worse, default treatment can produce a substantial avoidable tax bill.

Sources

• classic.austlii.edu.au — S97
• Australian Taxation Office (ATO) — Streaming trust capital gains and franked distributions
• Australian Taxation Office (ATO) — Family trust elections and distribution tax
• Australian Taxation Office (ATO) — Individual income tax rates
• Australian Taxation Office (ATO) — Your obligations as a trustee