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The professional services firm has released tax planning advice for family groups ahead of the financial year.
Family groups must start tax planning now, says Grant Thornton
27 May 2025
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8 minute read
As the end of the financial year looms, Grant Thornton is recommending that family groups consider their annual tax planning to take advantage of opportunities and manage risk areas.
The firm said tax planning was a critical part of the tax management process for all family groups and provided maximised tax efficiency, mitigated risks and tax compliance, proactive cash flow and tax funding management, tax incentives and opportunities to grow personal wealth.
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The first step for family groups recommended by Grant Thornton was to determine their tax strategy, as this would support the family’s overall business and investment plans.
It was noted that families often preferred different strategies, such as paying taxes each year or deferring them; however, tax strategy was crucial in setting up this structure.
“There is no single correct strategy, but it is important for families and their tax advisors to be working toward the same goals. This includes plenty of discussion and communication to ensure everyone is on the same page,” the firm said.
This strategy and structure included the consideration of a family trust, which is one of the most common structures used in family groups.
Grant Thornton said when undertaking annual tax planning, it was critical that trustees completed a distribution resolution before year-end. Without this resolution, the trust could end up paying penalty rates of tax on the income earned during the year.
In the case of a distribution resolution, it was recommended for certain areas to be reviewed, including if the deed was up to date and if it afforded the trustee all powers, who the eligible beneficiaries were, how the income was defined, as well as how and when the income needed to be distributed.
“The ATO is also increasingly focusing on Family Trust Elections and Interposed Entity Elections in family groups of all sizes,” the firm said.
“Similar to the annual distribution resolution, incorrect management of FTEs and IEEs can result in the family trust paying penalty rates of tax on its income. Family groups should carefully consider the impact of FTEs and IEEs on their proposed distribution arrangements each year.”
According to Grant Thornton, another key area of focus for the ATO was Division 7A, as loans needed to be repaid in full or be subject to a complying loan agreement that required minimum rates of interest and principal repayment over seven years.
The firm said Division 7A loan agreements and the subsequent repayments had strict timing requirements associated with them and that declaring a dividend would have wider tax implications for the family, which had recently intensified based on significant increases to the Division 7A interest rate.
Tax planning also enabled families to take advantage of the opportunity to mitigate any tax risks, as the regulatory environment surrounding tax in family groups had recently significantly changed.
The ATO ran programs dedicated to reviewing the tax affairs of private Australian groups such as the Top 500, Next 5,000, as well as medium and emerging private group programs.
“Any family group that controls wealth in excess of $5m or a business with annual turnover above $10m will fall into one of these programs,” the firm said.
“The areas of focus are broad, but include tax lodgement compliance, succession planning arrangements, family trust distributions including to children and other relatives, Division 7A, CGT, property transactions, and offshore assets.”
“Even for simple family groups with no or few compliance matters to address, these reviews can be demanding, time-consuming, and expensive – so it’s important to ensure emerging risk areas are addressed.”
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