Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
Hi all A quickie I hope.
I have recently bought shares in the name of the family trust which have 100% franking. How can the benefit of this franking be used?
belleran
thanks Alexlee. So it is the same benefit as if we had purchased in our own names? belleran
Alex, If the trust doesn't make a profit in a particular year are the credits locked in there or can the credits be still used against the beneficiaries' income?
belleran
Hi Gordon, I've never fully understood Family Elections. Can someone please explain what this actually involves and why it limits the range of beneficiaries?Hi,
From memory I think that once you exceed more than $5,000 in franking credits the ATO will require you to make a "Family Election" which can limit the range of beneficiaries to some degree. This is also required if you wish to carry trust losses forward. In most circumstance this is not much of a problem.
Hopefully this is still correct.
Cheers - Gordon
Can trusts claim the franking credits when distributing income to a trust making loss?My understanding is that the credits are in fact "lost".
Can trusts claim the franking credits when distributing income to a trust making loss?
For example:
Trust 1: Holds shares, funds etc. Generates income and franking credits.
Trust 2: Holds property. Negative cash flow.
Can trust 1 distribute all income, INCLUDING franking credits to trust 2? Or does the fact that trust 2 is making a loss mean those franking credits are 'lost'?
PS: Assume deeds allow trust to trust distribution.
Hi,
No amount of discretion in your trust deed or goodwill from the ATO will allow you to stream the franking credits out to an individual while most of the net income of the trust is distributed to Trust 2. Unfortunately the Y-Man is correct the distribution to Trust 2 will result in franking credits being lost.
In short, try not to mix tax loss making property and franked dividend paying shares in the same trust. Franking credits are SO much more valuable when distributed complete to an individual with a low marginal tax rate.
Over the long term it isn't THAT much more effort to set up a separate trust for shares.
Alex
Do you have any references to back this up?
What about if you had a trust that had a small business and some shares. The shares received $1,000 fully franked dividend and the business made a loss of $500.
Are you only allowed to distribute $500 profit and $214 franking credits, or can you distribute the $500 and all the franking credits ($429)?