Guide on Trust Funds – Part 9
The franked dividend streaming rules
- The trust deed must allow for streaming
- The franked dividend must be distributed in its character as a franked dividend
- The distribution purporting to stream the franked dividend MUST BE IN WRITING no later than the financial year end (s. 207-58(1)(c))
- The franked dividend is taken to be streamed to a beneficiary to the extent they are entitled to the ‘net financial benefit’ attributable to the franked dividend, which is the case dividend less directly relevant expenses such as interest
- Each beneficiary to whom a franked dividend is streamed will be entitled to portion of the franking credits based on their percentage share of the total franked dividends. (s. 207-57)
- If the directly relevant expenses exceed the cash amount of the franked dividend, there is no
- amount of franked dividend that can be streamed.
- If some shares are negatively geared and other are not then, as long as there is a ‘net’ amount when all the franked dividends are taken into account, that ‘net’ amount can be streamed (s.207-59)
- If the net franked dividends exceed the net (taxable) income of the trust (due to other losses in the trust), to ensure all the franking credits are passed out to the beneficiaries, the trustee should not attempt to stream any of the franked dividends.
- Net franked dividends (whether streamed or not), together with franking credits are extracted from the net taxable income and disclosed separately in the Statement of Distribution, and also in the beneficiary’s return.
The capital gain streaming rules
- The trust deed must allow for streaming
- The capital gain must be distributed in its character as a capital gain
- The distribution purporting to stream the franked dividend MUST BE IN WRITING no later
- than the 31 August 2013 (s. 115-228(1) (c))
- The capital gain is taken to be streamed to a beneficiary to the extent they are entitled to the ‘net financial benefit’ attributable to the capital gain, which is the ‘gross’ capital gain less any capital losses.
- If the net (taxable) capital gain exceeds the net (taxable) income of the trust (due to other losses in the trust), to ensure all the capital gain is distributed to the beneficiaries, the trustee should not attempt to stream any of the franked dividends.
- If the capital losses exceed the capital gain, there is no capital gain available for streaming as there will be no net (taxable) capital gain.
- Net capital gains (whether streamed or not) are extracted from the net (taxable) income and are disclosed separately in the Statement of Distribution and in the beneficiary’s return.
- The beneficiary includes their share of the net (taxable) capital gain in their assessable income after it has been grossed-up as has been reduced by any capital losses and/or the 50% discount and 50% active asset reduction.
