Don’t Let Backdated Trust Resolutions Cost You

A recent case before the Administrative Review Tribunal (ART) has clarified how strict the rules are when it comes to trust distributions and tax. 

The case involved the Goldenville Family Trust (GFT), which had distributed income in the 2015, 2016 and 2017 financial years. The trustee attempted to allocate some of this income, including to a beneficiary who lived overseas, with the goal of reducing the overall tax paid. 

Normally, if interest income is paid to someone overseas, a 10% withholding tax applies. But the Australian Taxation Office (ATO) disputed this treatment, arguing that the trustee’s resolutions (the official decisions on how to distribute income) weren’t valid, and that the income shouldn’t be treated as “interest” in the first place. 

What the Tribunal found 

1. The distributions weren’t valid 
   The ART ruled that the trustee hadn’t actually made the distribution decisions by ​30 June of each year, as required by law. While documents were later prepared to record the resolutions, the Tribunal wasn’t convinced the decisions were made before year-end. 
   
   Because of this, the distributions failed, and instead the default beneficiaries of the trust (who lived in Australia) became entitled to the income. 
   
   
2. The income wasn’t proven to be interest 
   Even if the distributions had been valid, the ART said there wasn’t enough evidence to prove the income was truly “interest.” Simply calling it interest wasn’t enough. Without reliable documentation, the Tribunal rejected that characterisation. 

Why this matters 

For anyone dealing with trusts, this case highlights two key lessons: 

• Decisions must be made before 30 June: Trust distribution decisions have to be finalised by year-end, not after. While paperwork can be prepared later, it can only confirm a genuine decision already made. Trying to backdate decisions or relying on vague or incomplete documents is a high-risk approach that’s likely to fail. 
• Labels aren’t everything: Calling income “interest” (or anything else) doesn’t automatically make it so. The ATO and the courts will look at the substance of the income, not just the wording, especially if the label has a big impact on tax outcomes. 

The case reference

The decision was The Trustee for Goldenville Family Trust A/C Xiangming Huang and Commissioner of Taxation (Taxation) [2025] ARTA 1355 (13 August 2025).