Hi I’m struggling with a few issues and would be grateful for some help. Our discretionary trust was set up in 06/07. No family trust election has been made and no distributions have been made. It has $1500 in carried over income losses from 06/07. This year it has some income losses and some capital losses. It has also received franked dividends in 07/08. My 3 questions are: 1. my understanding is that beneficiaries can only benefit from franking credits if the trust makes positive income: is that correct? 2. does the positive income (referred to in 1) have regard to CAPITAL gains/losses or just income? Ie, if interest/dividend income is +100 but the capital losses are, say, -2000, can beneficiaries benefit from the franking credit or are the franking credits lost because the trust is negative for the year OVERALL? 3. if it is possible to distribute the franking credits to a beneficiary, and this is done, are there any risks we should be aware of with respect to benefiting from carried over losses in the future (eg re family trust election etc / carefully selecting beneficiary etc)? Thanks in advance for your help.