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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.
     
    Skilled_Migrant likes this.
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
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    11,261
    Location:
    Southern Highlands NSW
    1. Yes.
    2. Yes. A dividend is income so any other income losses can offset it