Ask your Aspen advisor:
“We’ve got family trusts – should we be doing a health check before the ATO’s ‘confess and we’ll go easier on you’ window closes?”
If your family uses trusts, you might have seen the headlines: “ATO warns family trusts to confess to past errors.” It sounds dramatic, but there’s a real opportunity behind the warning.
The ATO has launched what’s being described as a partial amnesty for family groups with historic Family Trust Distribution Tax (FTDT) problems. In short, if you come forward, fix mistakes and pay what’s owed by the end of 2026, the ATO may remit up to 80% of the interest in suitable cases. Leave it, and you risk the full force of FTDT plus years of interest.
This is the ATO saying: “If you know something’s wrong, tell us now, not when we find it.”
Quick refresher: what is Family Trust Distribution Tax?
FTDT is a special 47% tax (plus Medicare levy) that can apply when distributions are made by a family trust outside the nominated “family group” under a family trust election.
It often comes up where:
- Family trust elections (FTEs) or interposed entity elections weren’t done, or
- Distributions over many years have gone to people or entities outside the intended group, or
- There are messy structures, restructures or “admin shortcuts” that didn’t match the paperwork.
On top of the tax itself, general interest charges (GIC) can build up over time and become very painful.
Why the ATO is doing this now
Several things have pushed this onto the ATO’s radar:
- Long-running audits have uncovered large FTDT exposures from simple administrative errors
- There’s concern that current rules can punish honest mistakes as harshly as deliberate avoidance
- The ATO’s Trusts Taskforce has FTDT as a priority area
Rather than hit everyone at once, the ATO has effectively said:
- Review your trusts and come forward by 31 December 2026, and
- In appropriate cases, it will consider remitting up to 80% of interest on FTDT liabilities.
That doesn’t make the tax go away, but it can dramatically reduce the “pain on top of the pain”.
What kinds of issues are we talking about?
Common risks we see include:
- Old trusts where no one is quite sure what elections were made (or if they were made at all)
- Distributions to extended family, companies or entities that sit outside the original “family group”
- Long-running patterns of distributions that don’t match the formal structure on paper
- Restructures or refinancing steps where the flow of distributions wasn’t fully thought through
In many cases, these started as “seemed fine at the time” decisions rather than deliberate avoidance. Unfortunately, the FTDT rules don’t always distinguish cleanly between the two.
What should trustees and families do now?
This isn’t something to panic over – but it isn’t something to ignore either.
A sensible approach looks like:
- Identify your trusts
Make a list of all family trusts in the group, including older or “inactive” ones. - Find the paperwork
Collect trust deeds, variations, family trust elections, interposed entity elections and distribution resolutions where possible. - Review past distribution patterns
Look at who has been receiving distributions and in what form (directly, through companies, through other trusts). - Do a risk triage
With your advisor, work out which trusts are likely fine, which are “grey”, and which might have clear exposure. - Consider engaging with the ATO early
Where issues are identified, there may be real value in approaching the ATO under this “confess early” approach rather than waiting for an audit.
How Aspen can help
We can assist you to:
- Map out your trust structures and elections
- Review historical distribution patterns for FTDT risk
- Quantify potential exposures and the impact of possible interest remission
- Help manage any voluntary disclosure to the ATO in a structured way
Final thought
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