Family Trust Election Form: When and How to Lodge

Use the family trust election form to choose the trust’s test individual and starting income year, then lodge it with the ATO. Before making an election, check existing records and the family group: changing a valid election is tightly restricted.

What is a Family Trust Election

A family trust election is the trustee’s written choice, on the approved form, for the trust to be a family trust for tax purposes. It specifies one individual and an income year. The election’s commencement also depends on when the trust passes the family control test.

The test individual determines the family group. A trust that confers present entitlement or distributes income or capital outside that group can incur family trust distribution tax (FTDT). The ATO states that the rate is 47%.

Calling a discretionary trust a family trust in its deed does not establish that an election exists. The election does not change the deed’s beneficiary clauses. You must satisfy both the deed and the tax rules when advising on distributions.

This is a long-term choice. A valid election continues until a permitted revocation takes effect, and the trustee cannot replace it each year. The regime was enacted in 1998, with historical elections also covering earlier income years under transitional rules.

Why Make One: Franking Credits, Trust Losses and Reporting

A family trust election can help a discretionary trust preserve franking credits and use tax losses, while excluding it from trustee beneficiary reporting rules.

For franking credits, the election can allow a beneficiary’s interest in shares held through the trust to be held at risk. It does not remove the holding period rules. Ordinarily, the required continuous period is 45 days, or 90 days for preference shares, within the relevant qualification period. Both the trust’s position and the beneficiary’s position need consideration.

For trust losses, family trust status removes most specific trust loss tests. The income injection test still needs consideration, although dealings wholly within the family group receive concessional treatment. Check when the election takes effect against the loss and recoupment years before treating a prior-year loss as deductible.

Trusts with an election are generally excluded from trustee beneficiary reporting. That exclusion does not remove every trust reporting obligation. Use the closely held trust guide when checking beneficiary reporting and withholding requirements.

The downsides affect future distributions:

• The chosen individual anchors the family group, so recipients must fit the statutory rules.
• Distributions outside the group can attract FTDT on their amount or value.
• Changing the test individual or revoking the election requires a specific legal ground.

An election is voluntary. Record the concession it is meant to support and whether the expected recipients fit the group before recommending one.

How to Check a Family Trust Election on the ATO Portal

In Online services for agents, open the trust client’s pre-generated Family trust elections (FTE) and interposed entity elections (IEE) report.

1. Select the trust client after confirming your practice has access to its record.
2. Select Lodgments, then Client reports.
3. Scroll to Pre-generated reports and select the Family trust elections (FTE) and interposed entity elections (IEE) report.
4. Save the report and compare it with the signed elections and prior trust returns.

The ATO’s agent online services guide documents this report location. The Online services for agents guide covers the broader access steps.

A blank report is not enough to conclude that no election exists. Check prior tax returns, the previous accountant’s file and the trustee’s own records. Ask for the signed form and lodgement evidence, including any variation or revocation.

Record the test individual, specified income year and commencement time. List every interposed entity election and the family trust it relates to. Where records disagree, identify the original document behind each entry and resolve the difference before relying on a concession or recommending a distribution.

Choosing the Test Individual and the Family Group

Choose one individual whose family matches the trust’s intended beneficiaries, then test the proposed recipients against the statutory family group. The person can differ from the trustee or appointor. The ATO requires the individual to be alive between the election’s commencement and its making.

The family definition in section 272-95 covers the following relatives, where applicable:

• Parents, grandparents, brothers and sisters of the test individual or their spouse.
• Children, nephews and nieces of the test individual or their spouse.
• Lineal descendants of those children, nephews and nieces.
• The test individual’s spouse and spouses of relatives covered by those categories.

Adopted children and stepchildren are included under the statutory rules. Certain former spouses and former stepchildren remain in the wider family group. A family member’s death does not by itself remove other family members.

The family group also includes qualifying entities. A trust with an election naming the same individual can qualify automatically. A company can qualify through the fixed-entitlement rules or through an interposed entity election. Being described as related, or sharing a director, establishes neither route.

Check section 272-90 and section 272-95 in Schedule 2F when a relationship is uncertain. An unrelated company outside every qualifying category triggers FTDT if it receives a relevant distribution.

Use the trust deed checklist to check beneficiary eligibility separately. A person inside the tax family group still needs authority under the deed to receive the proposed distribution.

Lodging the Family Trust Election Form

Make the election with the trust tax return through supported tax software, or lodge the approved form separately. A return entry recording an existing election is not a replacement for the original election.

The ATO publishes Family trust election, revocation or variation 2026, NAT 2787. The year in that form’s title identifies the edition. The 2025 form is a separate edition. A 2026 form can specify an earlier qualifying income year, so its title does not determine the election’s starting year.

Prepare the election in this order:

1. Confirm the trust’s identity and the trustee’s authority. Gather the deed and trustee-change documents, then reconcile them with the trust’s tax file number (TFN).
2. Select the specified income year. The year must have ended before the election is made, and the trust must pass the family control test at its end.
3. Establish the commencement time. For the specified year, this is generally its beginning or the earliest time the trust passes the test continuously through its end.
4. Complete the approved form. Enter the trust’s name, TFN and postal address. Include management and control details, trustee history and residency information, plus each corporate trustee’s ACN or ARBN. Supply the test individual’s name, TFN details, birth date and residential address.
5. Have every trustee sign and date the declaration when the election is made. For a corporate trustee, its public officer or a director signs. Attach the details and signature of each additional trustee as the form directs.
6. Lodge the election through the chosen route and save the acknowledgement. Keep the signed election with the deed file, then reconcile the lodged details with the trust return and election register.

An earlier year can be specified under section 272-80(4A). From that year’s beginning through the end of the income year before the election is made, the trust must continuously pass the family control test. Every relevant present entitlement and distribution during that period must also stay within the specified individual’s family group. Modern elections can specify 2004-05 or a later income year.

For example, an election made in income year 2026 can specify income year 2023 only if the historical conditions are met throughout the required intervening period. Review trustee control and every relevant distribution across those years. Sign with the actual making date. Choosing an earlier specified year does not authorise backdating a signature.

ATO Family Trust Election Errors and Fixes

For an election error, establish whether the problem is an incorrect record, an invalid election or a proposed change to a valid election. Each needs a different response.

Common problems include wrong test individual details, a specified year that fails the control test and a form signed by someone without trustee authority. A related company’s missing interposed entity election also needs investigation if it lacks another route into the family group.

Problem	Check	Corrective action
ATO report differs from the signed election	Compare the original form, receipt and return entries	Give the ATO the evidence and request correction of the record
Proposed test individual changes	Check statutory variation grounds and all past recipients	Use the approved variation procedure only when its conditions are met
Specified year fails eligibility	Test control and distributions over the required period	Establish validity with the ATO before submitting another form
Receiving entity lacks group membership	Check ownership rights, its elections and their commencement	Assess a valid interposed entity election and any existing FTDT liability separately

A normal test-individual variation is available once, within the statutory window. The new individual must have belonged to the original individual’s family when the election commenced. Past entitlements and distributions by the trust and its interposed entities must also fit the new individual’s family group. The ordinary window ends with the fourth income year after the specified year.

A separate variation route applies to qualifying family law orders, agreements or awards that transfer control. Revocation can apply to specified fixed-trust circumstances. Another revocation route requires that the election was unnecessary for relevant tax-loss deductions, bad-debt deductions and beneficiaries’ franking credit access. That route also has the statutory time limit. The test individual’s death alone permits neither variation nor revocation.

Use the approved variation or revocation schedule with the return for the year it takes effect. The ATO states that an already-lodged return cannot be amended to add that schedule. Where no return is required, the approved form must generally reach the ATO within two months after the year ends, or a later allowed day.

For a clerical discrepancy, send the original signed form and a clear explanation through the agent enquiry channel. For disputed validity or a proposed legal change, provide the deed, trustee history and distribution records. Seek a private ruling where applying the law to those facts remains uncertain. A replacement form can address a missing or invalid election only where the legal conditions permit it. It cannot overwrite a valid election or change its specified year.

The ATO’s family trust guidance distinguishes making, varying and revoking an election. Correcting a record does not erase tax already triggered by an outside-group distribution. Review that liability separately and keep the trustee informed of the exposure.

Interposed Entity Elections for Related Companies and Trusts

An interposed entity election lets a qualifying company, partnership or trust join the family group specified in a family trust election. Check automatic membership first, because an election carries ongoing restrictions on the receiving entity’s own distributions.

A company can already qualify when eligible family members and qualifying family trusts hold fixed entitlements to all its income and capital. A trust with an election naming the same test individual can also qualify. A company controlled by the family needs further examination if its ownership rights fail the all-income-and-capital test.

Consider a hypothetical family trust distributing to a bucket company. The company passes the family control test, but its share rights do not give the eligible family owners fixed entitlements to all income and capital. It has no existing interposed entity election. The company needs a valid election in force for the distribution to qualify through that route. Its association with the family is insufficient.

Use the approved Interposed entity election or revocation 2026 form, NAT 2788, for the receiving entity. Match the family trust and test individual to the source election. Check the family control test, specified commencement and any earlier-year conditions before signing and lodging.

The restriction follows the company after it elects. Its own distributions outside the family group can incur FTDT, including distributions funded from other income. Keep this consequence in the company’s advice file and review its later recipients.

At onboarding, list every receiving entity and its membership basis on the entity chart. Identify which entities need an election, which already have one and which qualify without one. Match that register to the recipients in the trust distribution resolution before the trustee makes the next distribution.