Family Trust Distribution Calculator Australia

What the family trust distribution calculator does

The family trust distribution calculator works out how a discretionary trust's net income should be spread across up to three beneficiaries to keep the family's total tax as low as possible. It reports the amount each beneficiary receives, the tax each one pays on that amount, the combined total, and how that compares with two obvious alternatives: splitting the income evenly, and leaving it in the trust.

It is built for the decision a trustee has to make before 30 June each year, when the distribution resolution is signed and the tax consequences for everyone in the family are locked in.

How trust income is taxed

A discretionary trust is a conduit rather than a taxpayer. Where a beneficiary is presently entitled to a share of the trust's net income, that share is taxed to the beneficiary at their own marginal rate. The trust itself pays nothing on the distributed amount.

That is why the identity of the recipient matters so much. The same dollar of trust income can be taxed at nothing, at the lowest bracket rate, or at the top rate plus the Medicare levy, depending purely on who receives it and what other income they already have.

Where income is not distributed, the trustee is assessed on it under section 99A at the top marginal rate. There is no tax-free threshold and no offset to soften it, which is why undistributed income is almost always the most expensive option and why the resolution deadline is taken so seriously.

How the calculator finds the split

You enter the trust's net income, how many beneficiaries you are working with, and the other taxable income each of them already has for the year. The calculator then evaluates the possible splits and keeps the one that produces the lowest combined tax.

Tax for each beneficiary is measured as a difference, not as a flat rate. Their share is added on top of the income they already have, their total tax is recalculated using the resident brackets, the Low Income Tax Offset and the Medicare levy, and the increase is what the distribution costs them. That makes the answer honest when a distribution straddles a bracket boundary.

The search is a grid sweep rather than a dollar-by-dollar allocation. That choice is deliberate. The Medicare levy behaves as a cliff: a beneficiary just under the low-income threshold pays no levy at all, and the dollar that takes them over it triggers the levy on their whole income. A step-by-step allocation gets stuck just below that cliff and never discovers that pushing further through it is worth it. Sweeping the whole range avoids that trap.

Entering each beneficiary's position

The other income figure for each beneficiary is their taxable income for the year from every other source: salary, business profit, investment income, and any distribution they receive from another entity. It is what determines which bracket their trust share lands in, so an estimate that is wildly out will produce an answer that is wildly out with it.

A beneficiary with no other income is the most valuable recipient in the family, because their share runs through the tax-free threshold, the lowest bracket and the Low Income Tax Offset before it meets any meaningful rate. Adult children studying full time and a non-working spouse are the classic examples, provided they are genuinely presently entitled to the money rather than having it applied on their behalf without any real entitlement.

Minor beneficiaries and Division 6AA

Distributing to children used to be the simplest way to use up low brackets, and Division 6AA exists to stop it. Where a beneficiary under 18 receives unearned income such as a trust distribution, a small amount is tax free, a narrow middle band is taxed at a punitive rate on the excess, and beyond a low threshold the top marginal rate applies to the entire distribution rather than just the top slice.

Tick the minor box on the third beneficiary and the calculator switches that person to the Division 6AA table. In practice the optimiser will usually give a minor an amount right at the tax-free limit and no more, which is exactly the behaviour the legislation is designed to produce. The tax-free limit and the point where the top penalty rate starts are both reported as outputs so you can see where the boundary sits.

Excepted persons, such as a minor with a disability support pension or one who works full time, are outside Division 6AA and should be entered as an ordinary beneficiary instead.

Reading the comparison figures

Three totals are shown side by side. The headline number is the tax on the split you chose. Underneath it, the tax on an even split shows what a lazy resolution would cost, and the tax if the income were retained shows the trustee assessment at the top marginal rate.

The two saving figures are simply the differences. A negative saving against retaining income is possible and worth noticing: where the only available beneficiary is already on the top rate, the Medicare levy means distributing can cost slightly more than leaving the income with the trustee.

What the calculator does not model

The trust's net income is treated as ordinary assessable income throughout. Franked dividends carry imputation credits that can refund tax for a low-income beneficiary, discount capital gains keep their concessional character in the beneficiary's hands, and both can be streamed to particular beneficiaries. Any of these can change the answer, and none of them is modelled here.

Nor does the calculator consider family trust elections and the family group rules, trustee beneficiary reporting, unpaid present entitlements to a corporate beneficiary and the Division 7A consequences that follow, the effect of a distribution on child support or family assistance entitlements, or state land tax surcharges on trust-held property.

Every rate, bracket and threshold used comes from the current ATO parameters rather than being written into the code, so the figures move when the ATO updates them.

This is an estimate for planning purposes only, not tax advice. Confirm the outcome with your accountant before you sign the distribution resolution.

About This Tool: Family Trust Distribution

Family trust distribution: use this tool to get an instant, accurate estimate. The figures follow official ATO guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.