From www.accountantsdaily.com.au: Distributions from a family trust to a company could trigger the family trust distribution tax if the company’s directors have discretion over dividend distribution.

The Commissioner of Taxation has indicated that distributions may not be considered to have fixed entitlements if they rely on discretionary decisions, potentially resulting in a tax liability of 47%.

Trustees need to review company constitutions carefully to avoid unintended tax consequences when distributing income or capital to corporate beneficiaries.