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Discretionary Trust distributing Franking Credits

Discussion in 'Accounting, Tax & Legal' started by kadaj, 24th Jun, 2016.

  1. kadaj

    kadaj New Member

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    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
     
  2. Terryw

    Terryw Well-Known Member

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    What does the deed say?
     
  3. kadaj

    kadaj New Member

    Joined:
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    Location:
    Melbourne - World's most liveable city
    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
     
  4. Terryw

    Terryw Well-Known Member

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