As the end of the financial year approaches, business owners face a series of crucial tasks to finalise their financial and taxation obligations for 2023-24 FY and prepare for the new financial year.
With the 30 June deadline approaching, there are two key items that demand your immediate attention: Trustee Resolutions and Division 7A Implications. Addressing these tasks promptly is essential to avoid complications and ensure that your intended tax benefits and compliance obligations are met. Failing to complete, or resolve, these matters before the 30 June deadline could mean that the necessary actions and outcomes are unable to be applied and executed as intended, potentially affecting the proposed tax benefit, as well as impacting tax compliance obligations.
You can explore our comprehensive list of End of Financial Year Tax Tips, but here’s a closer look at the critical actions required for Trustee Resolutions and Division 7A Loans before 30 June 2024.
Make Trustee Resolutions before 30 June
When must you make resolutions?
If you allocate trust income to beneficiaries through a resolution, it must be completed by the end of the financial year (30 June) to determine who is assessed on the trust’s net (taxable) income.
Sometimes a trust deed will require a resolution to be made before the end of the income year. In this case you should comply with the deed. For example, if the trust deed requires your resolution to be made by 28 June, then you should make the resolution by that date.
If your trust deed requires an earlier resolution, all references below to 30 June should be read as the earlier date required by your deed.
For beneficiaries entitled to trust capital gains, the resolution must be made within two months after the financial year ends (31 August).
Is there a standard format for a resolution?
There is no standard format for trust resolutions due to the diversity in trust deeds. The key requirement is that your resolution makes one or more beneficiaries presently entitled to the trust income by 30 June.
Does a resolution have to be in writing?
The necessity of a written resolution depends on your trust deed’s terms. However, having a written record provides clearer evidence and helps avoid disputes with the ATO or beneficiaries.
A written record is crucial if you intend to stream capital gains or franked distributions for tax purposes, as beneficiaries must be specifically entitled to these in writing by:
- 30 June for franked dividends
- 31 August for capital gains
A beneficiary cannot be made specifically entitled to a capital gain included in the trust estate’s income after 30 June if another beneficiary (including a default beneficiary) was entitled to it before that date.
Declare Dividends To be Used Against Div. 7A Loans
The ATO closely monitors compliance with Division 7A loan provisions. If you plan to use dividends to meet the Minimum Yearly Repayment (MYR) for a Division 7A loan, you must declare these dividends by 30 June 2024 and issue the distribution statement to shareholders by 31 October 2024.
Failure to meet these conditions may render the transaction non-compliant with the “principle of mutual set-off,” potentially invalidating the MYR.
Other important actions to take in relation to Div. 7A Loans and MYR include:
- Identify any 2023-24 loans and ensure they are fully repaid or managed (with complying loan agreement) before the lodgement day of 2024 tax return.
- MYR required by 30 June 2024 for complying loans made in 2022-23 and prior income years
- For any outstanding MYR from previous years it may be possible to request an extension from the ATO under section 109RD Income Tax Assessment Act 1936.
By addressing these critical tasks before 30 June, you can ensure your business meets its financial obligations and maximises its tax position for the 2023-24 financial year.
Need Help?
Navigating and complying with complex taxation obligations can be overwhelming and risky due to potential penalties. Therefore, it is important to seek advice from professional tax accountants and tax lawyers like the team at The Quinn Group, who use their knowledge and expertise to ensure you meet your obligations and legally minimise your tax liability.
Call us on 1300 (QUINNS) or + 61 2 9223 9166, or submit an online enquiry today and schedule a meeting or teleconference. We can discuss your specific needs regarding trustee resolutions, declaring dividends for Div. 7A loans, or any other taxation matter.
