Loading
FrankingFan(Initiate)Initiate
7 May 2026

We have a discretionary trust that holds income producing investments. We have a baby due in July 2026 (next financial year). Can some income be distributed to the unborn baby this financial year, and next year when they have a tax file number, can they complete their tax return for the previous financial year and receive franking credits? The crux of my question is, does the ATO consider a conceived baby to be a minor for the purposes of trust distributions or does the baby actually have to born first?

182 views
10 replies
182 views
10 replies

Most helpful response

Most helpful replyATO Certified Response

RachelATO(Community Moderator)Community Moderator
ATO Certified Response7 May 2026

Hi @lachlanjmcneill,


No, an unborn baby cannot receive a trust distribution. For tax purposes, a person must exist as a legal entity to receive income or trust distributions. This means the baby must be born before they can be a beneficiary entitled to receive trust income.


Once your baby is born in the 2025-26 financial year, they can become a beneficiary. However, they can't receive distributions for the current 2024-25 financial year.


After your baby is born and becomes a beneficiary, you'll need to be aware that different tax rules apply to minors receiving trust distributions. When a minor receives certain types of income from a trust, it may be taxed at higher rates unless it qualifies as excepted income. Franking credits attached to dividends distributed to minors are subject to specific rules, and they would need a tax file number to lodge a tax return and claim any entitlements.

All replies

TaxTalk1234(Master)Master
7 May 2026

No, an unborn child is not a person for tax purposes.

DIstributing more than $416 to a minor isn't going to be tax effective anyway.

  • Avatar of platypus
Liked by Bruce4Tax
FrankingFan(Initiate)Initiate
7 May 2026

I’ve looked into it further and you are wrong. An unborn child can be considered a person under tax law and for the purposes of trust distributions provided they are born in the same financial year the distribution is made and hence actually receive the benefit in the financial year. They can receive the benefit in utero, provided they are born in the same financial year as the benefit.


Yes, the question is about a distribution up to the $416 limit.

TaxTalk1234(Master)Master
7 May 2026

A little rude perhaps? For trusts, the entitlement to the distribution arises at the point in time at which they become presently entitled to the income from the trust. Which has to be before 30 June. An unborn child is not a person for tax purposes. A child who is born is, but that wasn't the scenario you were talking about, you were talking about distributing to your child in the financial year they are in utero the whole time, which cannot be done.

  • Avatar of platypus
Liked by Bruce4Tax
FrankingFan(Initiate)Initiate
8 May 2026

@TaxTalk1234

People get on this forum to ask questions and actually understand the answer. You get on the forum and give one sentence responses without any explanation or reasoning, like your opinion is a royal decree that someone should just read and accept. The ATO in fact does treat an unborn child as a person for tax purposes in at least one situation that I know of (ATO ID 1051996092579).

TaxTalk1234(Master)Master
9 May 2026

@FrankingFan

lol, you are on the internet seeking free advice, someone volunteers to respond to your question and gives the correct answer, and that's not good enough for you? All the angst for a scheme that would benefit you by, at most, $196??

Most helpful replyATO Certified Response

RachelATO(Community Moderator)Community Moderator
ATO Certified Response7 May 2026

Hi @lachlanjmcneill,


No, an unborn baby cannot receive a trust distribution. For tax purposes, a person must exist as a legal entity to receive income or trust distributions. This means the baby must be born before they can be a beneficiary entitled to receive trust income.


Once your baby is born in the 2025-26 financial year, they can become a beneficiary. However, they can't receive distributions for the current 2024-25 financial year.


After your baby is born and becomes a beneficiary, you'll need to be aware that different tax rules apply to minors receiving trust distributions. When a minor receives certain types of income from a trust, it may be taxed at higher rates unless it qualifies as excepted income. Franking credits attached to dividends distributed to minors are subject to specific rules, and they would need a tax file number to lodge a tax return and claim any entitlements.

  • Avatar of platypus
Liked by Bruce4Tax and knaresbro
FrankingFan(Initiate)Initiate
7 May 2026

Thanks for the reply. I realise now, they must be born prior to making the distribution. I have found the ATO’s interpretation of the en ventre sa mère principal and can see the words “presently entitled” are used which I understand means they must be present (born) at the time of the distribution. That’s for actually expanding on the answer.

Featured articles

Finding your TFN

6 Feb 2026 · 4 min read time

Linking the ATO to your myGov account

16 June 2026 · 2 min read time

Spouse details and your tax return

15 Apr 2026 · 3 min read time

Top liked users

  1. Bruce4Tax

    (Taxicorn)

    3115 likes

  2. Taxduck

    (Taxicorn)

    2132 likes

  3. PayrollDeanne

    (Taxicorn)

    862 likes

  4. YellowPotato

    (Taxicorn)

    561 likes

  5. knaresbro

    (Devotee)

    374 likes

Top contributors

  1. Bruce4Tax

    (Taxicorn)

    9671contributions

  2. Taxduck

    (Taxicorn)

    4848contributions

  3. PayrollDeanne

    (Taxicorn)

    2076contributions

  4. YellowPotato

    (Taxicorn)

    1406contributions

  5. YEP

    (Devotee)

    836contributions

Loading
Can an unborn baby receive a trust distribution? | ATO Community