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Tax Tip 115: Trust Losses and Franking Credits

Discussion in 'Accounting & Tax' started by Terry_w, 5th May, 2016.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Trust Losses and Franking Credits


    Where a trust receives dividends but does not have a positive income the benefits of the franking credits will be lost.


    Example

    The Smith Family Trust invests in shares and receives:

    Franked dividends of $2,100

    Franking credits of $900

    Total income of the trust will be $3,000


    If the trust also owns a rental property which produces a taxable loss of negative $4,000 then

    Income of the trust will be -$1,000

    A $1,000 loss


    Because there is no taxable income of the trust there is nothing to distribute and the franking credits will be lost.


    For this reason it may be a good idea not to hold property in the same trust if the trust holds shares.
     
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  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There is a simple away around that.

    Who says the trust has to claim a deduction for all of its rental costs ??
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    1. Can the dividends be distributed onto beneficiaries of the trust with the franking credits still intact?

    2. What if the dividends are unfranked? Can this be applied against the trust losses?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1. Yes.
    2. Yes. A dividend is income so any other income losses can offset it