Claiming franking credits attached to a partnership distribution
When calculating its net income or loss for tax purposes, a partnership that is paid or credited a franked dividend includes both the amount of the dividend and the franking credit in its assessable income. This is subject to the partnership satisfying the holding period rule and other rules contained in the provisions dealing with franked dividends.
If a share of the net income or loss of a partnership is attributable to a franked dividend, you may be entitled to claim a franking tax offset, which is your share of the partnership’s franking credit arising from that dividend.
You're not entitled to a franking tax offset if you don't satisfy the holding period rule or related payments rule for your interest in the shares held by the partnership, or if the partnership doesn't satisfy those rules for the shares.
If the partnership satisfies the rules for the shares and the small shareholder exemption applies to you, you don't have to satisfy the holding period rule.
For more information, see When you're not entitled to claim a franking tax offset.
Example 10: partnerships and trusts
|
Item |
Value |
|---|---|
|
Franked dividend |
700 |
|
Franking credit, non-cash |
300 |
|
Net income of partnership |
1,000 |
|
Item |
Value |
|---|---|
|
Taxable half share of net income of the partnership |
500 |
|
Other assessable income |
80,000 |
|
Total taxable income |
80,500 |
|
Gross tax at 2024–25 rates |
14938 |
|
subtract half of the total franking tax offset |
150 |
|
Tax payable (see note) |
14,788 |
Note: This doesn't include any liability for the Medicare levy.
End of exampleClaiming franking credits attached to a trust distribution
A trust that is paid or credited franked dividends includes both the amount of the dividend and the franking 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 any net income of a trust to which no beneficiary is presently entitled, or for which the trustee is assessed on behalf of a beneficiary who is under a legal disability, the trustee is taxed on that income at special rates of tax. The trustee will be entitled to a franking tax offset for any franking credit included in that part of the net income.
If you're the beneficiary of a trust and the trust makes a loss for tax purposes, there is no net income of the trust and any franking credit is lost. Trusts can't distribute losses to beneficiaries.
If a share of the net income of a trust, is attributable to a franked dividend, you may be able to claim a franking tax offset. This is your share of the trust’s franking credit arising from that dividend.
If the trust is a widely held trust, you won't be entitled to a franking tax offset if you don't satisfy the holding period rule or related payments rule for your interest as a beneficiary in the trust or the trust doesn't satisfy those rules for the shares. If the trust is not a widely held trust, you must satisfy the holding period rule and related payments rule for your interest in the shares held by the trust to be entitled to the franking tax offset.
If the trust satisfies the holding period rule and other rules for the shares and the small shareholder exemption applies to you, you don't have to satisfy the holding period rule.
For more information, see When you're not entitled to claim a franking tax offset.
Special rules apply to beneficiaries of trusts (other than trusts that elect to be family trusts within the meaning of the ITAA 1936 or deceased estates) to determine whether they hold their interest at risk.
Example 11: trust with loss in 2024–25
|
Item |
Value |
|---|---|
|
Franked dividend |
2,100 |
|
Franking credit, non-cash |
900 |
|
Total income of the trust |
3,000 |
|
subtract deductible expenses of the trust |
4,000 |
|
Loss |
−1,000 |
Trusts can't distribute losses to beneficiaries. Franking credits are not refundable in this example.
End of example
Example 12: trust with net income in 2024–25
|
Item |
Value |
|---|---|
|
Franked dividend |
2,100 |
|
Franking credit, non-cash |
900 |
|
Net income of trust |
3,000 |
|
Item |
Value |
|---|---|
|
Taxable one-third share of net income of trust |
1,000 |
|
Other assessable income |
80,000 |
|
Total taxable income |
81,000 |
|
Gross tax at 2024–25 rates |
15,088 |
|
subtract one-third of total franking tax offset |
300 |
|
Tax payable (see note) |
14,788 |
Note: This doesn't include any liability for the Medicare levy.
End of exampleContinue to: Joint ownership of shares
Return to: Franking tax offsets and franking credits