Distributions from discretionary trusts

On April 12 2017 a very interesting decision by the Full Court of the Federal Court was handed down that allowed the taxpayer's appeal from the Federal Court decision in Thomas v FC of T 2015 ATC 20-526.

The Full Court held that the Supreme Court of Queensland's interpretation of the trust deed and trustee resolutions of a discretionary trust were binding on the Commissioner of Taxation where there were two separate resolutions by the trustee:

• one dealing with the trust's net income for the relevant years in certain proportions; and
• the other with the distribution of franking credits in different proportions.

Although the Full Court expressed some relatively strong scepticism about the construction of the resolutions adopted by Applegarth J in the Supreme Court proceedings, it nevertheless determined that the Commissioner was bound by the declaration made by the Supreme Court.