Family Trust Election
It is not enough to simply include the words 'family trust' in your trust's name. A trustee can only make a valid family trust election where it has satisfied the relevant tests and made an election in writing in the approved form. Once the family trust election (FTE) has been made, it cannot be varied or revoked except in limited circumstances.
What is a family trust election?
A family trust election (“FTE”) is made upon discretion by a trustee in which it nominates an individual (the test individual) around whom a family group is formed. The family group is then restricted to a maximum group compared to all of the potential beneficiaries possible in the trust deed to avoid triggering significant adverse tax outcomes, such as family trust distributions tax.
Why make a FTE?
The circumstances that should be considered before making a family trust election are as following:
The trust receives franked dividends
The trust has losses
The trust owns shares in a company with losses
To bring the trust within the family group of another trust, or
Where the trust is involved in a restructure under the new small business restructure roll over relief
To conclude If your trust receives franked dividends, has losses, or own shares in a company with losses, the trustee should only then consider making a FTE otherwise it is generally not recommended that a trustee makes one.
Should you have any questions regarding Family Trust Elections, please contact the advisors at Cordner Advisory.
Cordner Advisory - Your Business Advisory, Accounting & Tax Specialists. Catering for clients all across Australia, from the golden beaches of the Gold Coast and Sunshine Coast to the capital cities such as Brisbane, Sydney and Melbourne
