Discretionary Trust distributing Franking Credits

Hi All,

I am a trustee (non-corporate) for a family trust that owns some mining shares, that recently distributed a Exploration Development Incentive Credits (EDI).

After some brief research, I discovered they are almost identical to franking credits, barring the lack of dividends, and should be treated as a FC the way one would receive a refundable tax offset in their tax returns.

My question is in distributing this EDI-credits (FC) under a discretionary trust - hypothetically that the trust is in a net profit position, would I be able to distribute net income to one person but full FC to another person.

i.e. Trust Net Profit (Grossed up FC) = $1000
EDI Credits = $100
Distribute Person A $900
Distribute Person B $100 FC Only

OR do I have to distribute FC proportionately based on how much net income each beneficiary receives?

i.e. Trust Net Profit (Grossed up FC) = $1000
EDI Credits = $100
Distribute Person A 80% $720 + $80 FC
Distribute Person B 20% $200 + $20 FC

Thanks

 

What does the deed say?

 

Excuse the length of this post - but this is what it says under the deed.

and..

Understanding the discretionary nature of making distrbutions, but the question still stands - whether EDI/FC can be distrbuted fully to one person and other incomes separately to other beneficiaries, or do I have to distribute the EDI's in proportion to (or depending on) how much profits is distributed to each beneficiary for the Income year.

Thanks

 

Now you have to try to determine whether EDI/FC falls into one of those classes.