Show download pdf controls
  • Beneficiaries who have an amount attributable to a dividend included in their net income from a trust

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    A trust that is paid or credited franked dividends includes both the amount of the dividend and the imputation credit in its assessable income when calculating its net income or loss for tax purposes. This is subject to the trust satisfying the holding period rule and other rules contained in the provisions dealing with franked dividends.

    If there is income of a trust to which no beneficiary is entitled, the trustee of the trust is assessable on that share of the net income of the trust and will be entitled to a franking rebate for any imputation credit included in that share of the net income.

    If you are the beneficiary of a trust and the trust makes a loss for tax purposes, there is no net income of the trust and any imputation credit is lost. Trust losses cannot be distributed to beneficiaries.

    If a share of the net income of a trust shown at item 11 on your tax return is attributable to a franked dividend, you may be entitled to claim a franking rebate. This is your share of the trust's imputation credit arising from that dividend.

    You will not be entitled to a franking rebate if you do not satisfy the holding period rule or related payments rule in relation to your interest in the trust or the trust does not satisfy those rules in relation to the shares.

    If the trust satisfies the rules in relation to the shares and the small shareholder exemption applies to you, you do not have to satisfy the holding period rule.

    For more information read the section When you are not entitled to claim a franking rebate .

    Special rules apply to beneficiaries of trusts to determine whether they hold their interest 'at risk'. However, these rules do not apply to:

    • beneficiaries of trusts that elect to be family trusts within the meaning of the Income Tax Assessment Act 1936
    • deceased estates.

    Example: Trust with net income in 1999

    Trust

    Franked dividend

    $1,920

    Imputation credit-non-cash

    $1,080

    Net income of trust

    $3,000

    Beneficiary

    Taxable 1/3 share of net income of trust

    $1,000

    Other income

    $10,000

    Total assessable

    $11,000

    Gross tax-1999-2000 rates

    $1,120

    Less 1/3 of total franking rebate

    $360

    Net tax

    $760

     

    End of example

     

    Example: Trust with loss in 1999-2000

    Trust

    Franked dividend

    $1,920

    Imputation credit-non-cash

    $1,080

    Total income of the trust

    $3,000

    Less deductible expenses of the trust

    $4,000

    Loss

    $(1,000)

    Trust losses cannot be distributed to beneficiaries

    End of example
    Last modified: 23 Dec 2019QC 16138