A Family Trust Election is an election made by the trustee of a discretionary trust to make that trust into a ‘family trust’ for tax purposes. This has the effect of limiting the beneficiaries to who the trustee can distribute to (without penalty tax) to the immediate family members of a nominated ‘test individual’. There are probably 4 reasons an FTE might be needed to be made: a) To carry forward losses b) To be able to distribute franking credits with franked dividends, c) To distribute to another trust within the family group, and d) For some small business CGT concessions A trust that has as FTE in force the trust is an exempted trust which means it doesn’t have to meet certain rules designed to stop the trading of trust losses. A FTE election of a test individual is generally irrevocable so great care must be taken before the trustee nominates a person. I will cover this in a future tip.