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16 Deductions relating to Australian investment income, franked distributions
If the trust was paid a dividend by a LIC directly and the dividend included a LIC capital gain amount, the trust can claim a deduction of 50% of the LIC capital gain amount. If the LIC dividend is franked (either fully or partially) then show at R any deduction relating to a LIC capital gain. If the LIC dividend is unfranked, then show at P any deduction relating to the LIC capital gain. The listed investment company’s dividend advice statement shows the LIC capital gain amount.
Show expenses that are directly related to franked distributions which are derived by the trust directly (rather than through another trust or partnership) at item 16 Deductions relating to: Franked distributions. These deductions should not include deductions shown at item 8 Deductions relating to franked distributions from trusts in label F. Expenses related to unfranked distributions are shown at item 16 Deductions relating to: Australian investment income.
Expenses listed here that are costs associated with borrowing and servicing debt may not be allowable deductions under the thin capitalisation rules, see appendix 3. The disallowed amount reduces the amount that would otherwise go at P or R.
Deductions for the decline in value of depreciating assets used to earn interest and dividends are generally shown at P or R. However, if the trust has allocated some of these assets to a low-value pool, you may need to show deductions at Q, see appendix 6.
Even if the TOFA rules apply to the trust, show at P or R all deductions relating to Australian investment income – this includes amounts from financial arrangements subject to the TOFA rules.
If what you show at P or R includes an amount which is brought to account under the TOFA rules, also complete item 31 Taxation of financial arrangements (TOFA).
For more information, see Guide to the taxation of financial arrangements (TOFA) rules.
Former STS taxpayers still using the STS accounting method
If the trust is eligible and has chosen to continue using the STS accounting method, it can claim general deductions (for example, interest expense) only when they are paid. For more information on the STS accounting method, see appendix 14.
Last modified: 13 Feb 2019QC 35444