Trust Distribution
Income distributed from a trust to its beneficiaries, who include it in their own tax returns at their individual tax rates.
A trust distribution is the allocation of income, capital gains, or franked dividends from a trust to its beneficiaries. In Australia, trusts themselves generally don't pay tax (except for any income not distributed to beneficiaries, which is taxed at the top marginal rate of 45%). Instead, beneficiaries include their share of the trust's distributable income in their own tax returns and pay tax at their individual rates.
Trust distributions can include various components: ordinary income (interest, rent, dividends), franked dividends (with franking credits passed through to beneficiaries), capital gains (which can retain their character, including the 50% CGT discount where the trust's own disposal happened before 1 July 2027), and tax-free amounts. The trustee determines how income is distributed among beneficiaries, which can allow some flexibility in tax planning by directing income to beneficiaries in lower tax brackets.
For managed investment trusts and property trusts, distributions are typically received quarterly or semi-annually, with a tax statement (known as an AMMA statement for AMITs) provided at year-end detailing the tax components. Beneficiaries must include their trust distribution in their tax return regardless of whether they actually receive the cash — for example, in a discretionary trust, the trustee may distribute income to you on paper but retain the cash in the trust for business purposes.
How it works
A trust distribution allocates a trust's income, capital gains, or franked dividends to its beneficiaries, who then declare their share on their own tax return at their individual tax rates. Trusts themselves generally don't pay tax on income they distribute — the trustee decides how income is allocated among beneficiaries each year, which is what gives trusts some flexibility in directing income toward beneficiaries on lower tax brackets, though any income the trustee doesn't distribute is instead taxed to the trustee at the top marginal rate of 45%.
In practice, beneficiaries of managed investment and property trusts typically receive distributions quarterly or semi-annually, with a year-end tax statement — an AMMA statement for Attribution Managed Investment Trusts — breaking the distribution into its components: ordinary income like interest and rent, franked dividends with their franking credits passed through, capital gains that can retain the 50% CGT discount if eligible, and tax-free amounts. Each of these is taxed differently once it reaches the beneficiary's own return.
A frequent source of confusion is that beneficiaries must declare their allocated share regardless of whether they actually received the cash — in a discretionary trust, the trustee may allocate income to you on paper while retaining the cash within the trust for business purposes, and you still owe tax on your declared share. Capital gains distributed through a trust can carry through their character, including CGT discount eligibility, which is a valuable feature investors sometimes overlook when comparing trust-held investments with direct share ownership.
Example: distributing trust income between two beneficiaries
A discretionary trust has $50,000 of net distributable income for the year, and the trustee allocates it evenly, $25,000 each, to two adult beneficiaries.
Each beneficiary declares $25,000 on their own tax return, added to their other assessable income and taxed at their individual marginal rate. If the trustee had instead left $10,000 undistributed, that $10,000 would be taxed to the trustee directly at the top marginal rate of 45%.
Calculate it yourself
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Franking Credits (Imputation Credits)
Tax credits attached to dividends representing company tax already paid on the profits, preventing double taxation.
Capital Gains Tax (CGT)
Tax on the profit made from selling or disposing of an asset, such as property, shares, or cryptocurrency.
Managed Fund Distribution
Income distributed to unit holders of a managed investment fund, which may include dividends, interest, capital gains, and tax credits.
ETF Distribution
Income distributed by an exchange-traded fund (ETF) to its unit holders, with tax components similar to managed fund distributions.
Income Tax
Tax levied by the federal government on your taxable income, calculated using progressive tax brackets.