Highlights

  • The ATO extended its general interest charge remission for family trust distribution tax liabilities to 30 June 2027.
  • Trustees who self-review and disclose a liability can have interest cut by up to 80% if the tax is paid.
  • The ATO says it does not plan to extend the remission beyond 30 June 2027.
  • FTDT is charged at 47%, with the trustee liable, and the ATO has no discretion over the tax itself.

A $100,000 family trust distribution tax bill left unpaid in 2005 would today carry interest more than ten times larger than the tax, accountant Dianne Hanna says. That is the problem the ATO is trying to soften. It has extended its general interest charge (GIC) remission for family trust distribution tax (FTDT) by six months, to 30 June 2027, and it has said it does not plan to extend it again. For trustees with old records to dig through, the clock matters.

What the ATO has announced

The extension applies to trustees who self-review and disclose an FTDT liability, and it is ATO administrative guidance, not a change to the law. The offer has been available since August 2025. The ATO will reduce GIC "by up to 80 per cent provided the FTDT liability is paid".

The ATO's family trusts page says the full 80% applies where the trustee self-reviewed before any ATO review began, lodged the Family trust distribution tax payment advice form (NAT 6175) and paid the FTDT. A smaller remission may apply to a voluntary disclosure made early in a review. Remission is generally unlikely once the ATO has issued an FTDT notice, or where there is evidence of avoidance, fraud or evasion. The extension responds to ATO stewardship group feedback about how hard historical records are to obtain.

What FTDT is

Many family trusts make a family trust election, which defines a family group around a nominated individual. If the trustee distributes income or capital to someone outside that group, FTDT applies at the top marginal rate plus the Medicare levy, currently 47%. The trustee, not the recipient, is liable.

Problems often go unnoticed for years. FTDT generally falls due 21 days after the distribution, and GIC runs from then, compounding daily, so on a liability unnoticed for decades the interest can outgrow the tax. Hanna called the extension welcome but "not a long-term fix", comparing the search for affected trusts to finding a "needle in a haystack".

What 80% remission is worth

Suppose a trustee reviews old records and finds a 2012 distribution that triggered $50,000 of FTDT, with GIC grown to $120,000 for a $170,000 debt. If the trustee discloses before any ATO review, lodges the payment advice form, pays the FTDT and receives the maximum remission, GIC falls to $24,000. The total payable becomes $74,000, a saving of $96,000.

The remission is "up to" 80%, so the ATO may grant less, and remaining GIC is not deductible for income years starting on or after 1 July 2025. The figures are illustrative, because actual GIC depends on dates and quarterly rates.

Why remission matters more now

The offer arrived "off the back of the GIC becoming non-deductible". Outside it, interest relief appears harder to win: Tax Ombudsman Ruth Owen's latest report found penalties or interest were reduced or remitted in only 5% of complaint cases, down from 17%,.

Trust advisers are also absorbing larger changes. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and a companion bill imposing a minimum tax on discretionary trusts were introduced on 14 October 2026 and are before a Senate committee. FTDT reform itself is not on the government's agenda.

What a self-review involves

A self-review means checking whether a family trust election or interposed entity election was made, who received distributions each year since, and whether every recipient sat within the family group. Records are often the hardest part, since elections and resolutions may date back decades and sit with a previous adviser.

Dates to watch

Submissions on the trust tax bills close to the Senate Economics Legislation Committee on Thursday 29 October 2026, and the committee's report is due on 13 November. After 30 June 2027, undisclosed FTDT liabilities the ATO finds itself may attract full GIC and possible penalties.