Trust Distribution Tax Calculator

Calculate how trust distributions are taxed across multiple beneficiaries. Compare marginal rates for adults, Division 6AA penalty rates for minors, and company tax rates — then see your total family tax and optimisation opportunities.

Trust Income

Net income of the trust for the financial year

Portion that is franked dividends

Portion that is capital gains

Beneficiaries

Salary/wages/business income before this distribution

Salary/wages/business income before this distribution

Enter values above to see results

How Trust Distribution Tax Works

A discretionary (family) trust is a common structure in Australia for managing investments, business income, and family wealth. The trust earns income during the financial year, and before 30 June the trustee resolves how to distribute that income among the beneficiaries.

Unlike a company, a trust is generally a flow-through entity — the income retains its character (ordinary income, dividends, capital gains) and is taxed in the hands of the beneficiaries at their individual rates. This creates significant tax planning opportunities through income splitting.

Tax Treatment by Beneficiary Type

Adult Individuals

Trust distributions are added to the beneficiary's other taxable income and taxed at their marginal rate. A low-income spouse or adult child receiving a distribution will pay much less tax than a high-income earner — this is the core benefit of trust income splitting.

Minors (Under 18)

Division 6AA imposes penalty rates on "unearned income" received by minors, including trust distributions. The effective rate reaches 45% on amounts over $1,307, making distributions to children generally tax-inefficient. The notable exception is income from testamentary trusts (created by a will), which is taxed at normal adult rates.

Companies

A corporate beneficiary (often called a "bucket company") pays a flat 25% tax rate (base rate entity). This can be useful for parking income above what individual beneficiaries can absorb at lower marginal rates. The company retains the after-tax income, which is later distributed as franked dividends.

Frequently asked questions

How are trust distributions taxed in Australia?
Trust distributions flow through to beneficiaries and are taxed at each beneficiary's marginal tax rate. The trust itself generally does not pay tax — instead, beneficiaries who are 'presently entitled' to the income include their share in their personal tax return. The type of income retains its character (ordinary income, franked dividends, capital gains) when distributed.
What happens if trust income is not distributed by 30 June?
Under Section 99A of the Income Tax Assessment Act 1936, if the trustee does not make a distribution resolution by 30 June, the undistributed income is assessed to the trustee at the top marginal rate of 45% plus 2% Medicare levy — a total of 47%. This is effectively a penalty rate with no tax-free threshold or CGT discount available.
How are trust distributions to minors taxed?
Trust distributions to beneficiaries under 18 are classified as 'unearned income' under Division 6AA and taxed at penalty rates: nil on the first $416, 66 cents per dollar from $417 to $1,307, and 45% on amounts above $1,307. This means minors effectively pay the top rate on most trust distributions. The key exception is income from testamentary trusts (created by a will), which is taxed at normal adult rates.
Can a trust stream capital gains to specific beneficiaries?
Yes. Under Subdivision 115-C, a trustee can choose to stream capital gains to specific beneficiaries through a valid distribution resolution. The beneficiary must have 'specific entitlement' to the capital gain. If the asset was held for more than 12 months, individual beneficiaries (not companies) can apply the 50% CGT discount to their share of the gain.
How do franking credits work with trust distributions?
When a trust receives franked dividends, the franking credits can be passed through to beneficiaries under Subdivision 207-B. Each beneficiary includes the grossed-up amount (dividend plus franking credits) in their assessable income, then claims the franking credits as a tax offset. For beneficiaries on low marginal rates, this can result in a net tax benefit or even a refund of excess credits.
What is Section 100A and how does it affect trust distributions?
Section 100A is an anti-avoidance provision that applies when there is a 'reimbursement agreement' — essentially, when income is distributed to a low-tax beneficiary on paper, but the economic benefit actually flows to someone else (typically the person controlling the trust). If the ATO applies Section 100A, the trustee is assessed at 47% on the affected amount. The ATO has been actively targeting these arrangements since 2022.

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Tax Accuracy & Sources

Reviewed: March 2026 · Tax year: 2025-26

This calculator uses 2025-26 ATO tax rates, Medicare levy, and Division 6AA rates for minors. It allocates franking credits and capital gains proportionally based on each beneficiary's share of the distribution. The calculator does not cover testamentary trust exceptions, Family Trust Distribution Tax (FTDT), or income streaming to specific beneficiaries. Trust tax is complex — always consult a registered tax agent before making distribution decisions.

Last updated 22 April 2026 Tax year 2025-26

Data sources: ATO (ato.gov.au), Services Australia

This tool is general information only, not financial advice.

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