Discretionary Trust Distribution Tax Calculator (Australia 2026-27)
Calculate Australian discretionary (family) trust distribution tax for 2026-27. Allocate trust distributable income across beneficiaries, apply individual marginal rates plus 2% Medicare Levy, the s 99A 47% trustee penalty rate on minors above the $416 threshold, the 30% non-resident rate, the 15% SMSF rate, and the company corporate rate. Includes Section 100A reasonable benefit warning and Income Streaming Resolution reminder. Free, private, runs entirely in your browser.
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Source: ATO — Trust Distributions § 99A § 100A + ATO Guidance Statement 2022/8. Last updated: May 3, 2026.
What Is a Discretionary (Family) Trust in Australia?
A discretionary trust — commonly called a "family trust" — is a trust where the trustee has full discretion to decide which beneficiaries receive distributions of income and capital each year, and in what proportions. Unlike a fixed unit trust, no beneficiary has a guaranteed entitlement until the trustee makes a valid resolution. Discretionary trusts are the most popular asset-protection and tax-streaming vehicle for Australian small-business owners and family investors. Source: Australian Taxation Office (ato.gov.au).
Under Section 97 of the Income Tax Assessment Act 1936, a presently-entitled beneficiary is taxed on their share of trust income at their own marginal rate. The trustee must make a valid Income Streaming Resolution before the end of the financial year (30 June for most trusts) — failing to do so means the trustee is taxed on the entire net income at the s 99A penalty rate of 47%. This calculator implements per-beneficiary streaming under the standard 2026-27 ATO rules. Last updated: May 3, 2026.
Beneficiary Categories and Tax Rates
Each beneficiary type is taxed differently in 2026-27:
- Adult resident individual: 0% on first $18,200 (tax-free threshold), then 16% / 30% / 37% / 45% across the brackets, plus 2% Medicare Levy from $24,276. Stage 3 resident rates in force from 1 July 2024.
- Minor (under 18): Division 6AA penalty rates apply to "unearned" trust income above $416. From $417 to $1,307 it is taxed at 66%. Above $1,307 the penalty rate is 47% (top marginal + Medicare). This single rule eliminates the tax benefit of streaming income to minor children — a deliberate ATO policy.
- Non-resident beneficiary: The trustee is assessed on their behalf at 30% (no tax-free threshold) on Australian-source income. Foreign-source income may flow through tax-free to the non-resident.
- Self-managed superannuation fund (SMSF): 15% in accumulation phase, 0% in pension phase. Note ATO non-arm's-length income (NALI) provisions if the trust is related.
- Company beneficiary (e.g., bucket company): 25% if a base rate entity (turnover ≤ $50M, ≤ 80% passive income), otherwise 30%. Critical: distributions paid to a corporate beneficiary that are not actually paid as cash within Subdivision EA timeframes can trigger Division 7A deemed-dividend assessment.
Section 100A: Reasonable Benefit Test
Section 100A of the Income Tax Assessment Act 1936 is an anti-avoidance rule that disregards trust distributions where the actual benefit doesn't flow to the named beneficiary, and where the arrangement was not entered into for the purpose of providing tax benefits beyond ordinary family financial management. ATO Taxation Ruling TR 2022/4 and Practical Compliance Guideline PCG 2022/2 (the "Section 100A guidance") restored a green/amber/red zone framework after the AAT's Owies v FCT 2025 review. Common red-zone arrangements include: distributions to elderly parents whose benefit is "lent back" to the trustee, distributions to adult children that are effectively retained by the parents, and circular distributions through discretionary chains.
If a distribution is caught by s 100A, the trustee is reassessed at the s 99A penalty rate of 47% on the disregarded amount, and the named beneficiary's tax assessment may be reversed (often resulting in penalty interest). Trustees should review the ATO's Section 100A guidance carefully before signing off on any distribution where the named beneficiary doesn't receive immediate cash. Documenting the actual movement of funds — and any genuine repayment terms for retained amounts — is the key compliance defense.
Income Streaming Resolution: 30 June Deadline
Australian Taxation Office Practical Statement PS LA 2014/12 confirms that trustees must make a valid Income Streaming Resolution before the end of the financial year (30 June for most trusts) for distributions to be effective for tax purposes. The resolution must specifically identify which beneficiary receives which class of income (e.g., franked dividends, capital gains, interest, foreign-source income) — generic "all income to beneficiary X" resolutions risk being invalidated by the ATO. Streaming franked dividends to a low-bracket beneficiary maximises the franking credit refund; streaming capital gains to a CGT-50%-discount-eligible beneficiary maximises the discount benefit.
If no valid resolution is signed by 30 June, Section 99A of ITAA 1936 deems the trustee to be assessed on the entire net income at the top marginal rate of 47% (45% top rate + 2% Medicare Levy) — destroying the tax-streaming benefit of the trust structure for that year. Trustees should set up a recurring 30 June checklist and consult their accountant well before year-end. Verify all rates and thresholds with the ATO 2026-27 income year publications before distributing.
Frequently Asked Questions
How is income from a discretionary trust taxed in Australia?
Under Section 97 of the Income Tax Assessment Act 1936, presently-entitled beneficiaries are taxed on their share of the trust's net income at their own marginal rate. The trustee makes a discretionary streaming decision before 30 June each year via an Income Streaming Resolution. If no valid resolution is made, Section 99A taxes the trustee on the entire undistributed income at 47% (top marginal + 2% Medicare Levy).
What is the s 99A penalty rate for minors?
Division 6AA of ITAA 1936 imposes penalty rates on "unearned" trust income distributed to minors under 18. The first $416 is tax-free, but income from $417 to $1,307 is taxed at 66%, and income above $1,307 is taxed at 47%. This rule eliminates the tax benefit of streaming income to children — a deliberate ATO anti-tax-shifting policy. Earned income (e.g., from a real after-school job) is not subject to these penalty rates.
What is Section 100A and the "reasonable benefit" test?
Section 100A of ITAA 1936 disregards trust distributions where the actual benefit doesn't flow to the named beneficiary, and where the arrangement's purpose extends beyond ordinary family financial management. ATO TR 2022/4 + PCG 2022/2 set out a green/amber/red risk framework. Common red-zone arrangements include: distributions to elderly parents that are immediately lent back to the trustee, distributions to adult children retained by parents, and circular distributions through discretionary chains. Caught distributions trigger trustee reassessment at 47%.
Are non-resident beneficiaries taxed differently?
Yes. The trustee is assessed on a non-resident beneficiary's share at 30% (the foreign resident marginal rate without the tax-free threshold) under Section 98 of ITAA 1936. The non-resident receives a credit for trustee tax paid, avoiding double taxation. Foreign-source income may flow through tax-free to the non-resident depending on the source rules. Treaty provisions can override these rates — check the relevant Australia tax treaty.
Can I distribute trust income to my SMSF?
Yes, but with caveats. SMSF beneficiaries are taxed at 15% in accumulation phase or 0% in pension phase. However, ATO Non-Arm's-Length Income (NALI) provisions in s 295-550 ITAA 1997 can deem related-party trust distributions to be taxed at 47% if the arrangement isn't at arm's length. The 2025-26 NALI amendments (effective 1 July 2025) further tightened these rules — review with a SMSF specialist before resolving.
What is a "bucket company" beneficiary?
A bucket company is a corporate beneficiary used to "cap" trust income tax at the company rate — 25% for a base rate entity (BRE: turnover ≤ $50M, ≤ 80% passive income) or 30% otherwise — instead of an individual's top marginal rate of 47%. Critical: distributions paid to a bucket company that aren't actually paid as cash within Subdivision EA timeframes (typically by the end of the next financial year) trigger Division 7A deemed-dividend assessment, which can reverse the tax benefit. Document Division 7A loan agreements properly.