Generally, beneficiaries of a trust who are presently entitled to a part of the trust income that is attributable to franked dividend income and partners of a partnership that has received franked dividend income, are entitled to a tax offset in respect of such income. (There are some exceptions to this rule – see What are the anti-avoidance rules?)
For beneficiaries of a trust:
there must always be some positive amount of trust income (as determined under section 95 of the Income Tax Assessment Act 1936) that the beneficiary is presently entitled to for a tax offset to be available, and
the tax offset is the portion of the franking credit attached to the franked dividend equivalent to the beneficiary's share of the net trust income attributable to the franked dividend.
For partners of a partnership:
a tax offset is available even where the partnership has sustained a loss, and
the tax offset is the portion of the franking credit attached to the franked dividend equivalent to the partner's interest in the partnership.
Because both the trust income and partnership income has been 'grossed up' to include the franking credit at the trust and partnership level, it is unnecessary for the individual beneficiary or partner to gross up the amounts received in their own tax return.
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