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Level 1

Australian Trust is given dividend as company shares with franking credits not in real hard cash.

Hi, I am not an accountant (please don't answer "this is why people should use accountants they're not capable" type answers :) I'm the trustee and record keeper (AUSTRALIA).

 

This year for the very first time my Australian Trust is given $664 worth of Australian publicly listed shares that also come with $285 in Australian franking credits instead of an actual real cash payment as its yearly dividend.

 

By the end of the Australian tax year of 30th June, I am to distribute the trust income including Australian franking credits to the beneficiary but as the trust has only received $664 dollars worth of shares and $285 in franking credits, no actual physical real cash, how do I treat the above distribution to the beneficiary in the set of accounts?

 

Taking a long term view Ideally I'd want the shares to remain in the trust and be allowed to grow in value, not distribute them out to the individual tax payer.

 

However am I better to change the DRP arrangement back to a cash situation and elect to have all future Australian dividends paid in real cash rather than in shares or is there another way I can treat this type of transaction, say distribute a non cash present entitlement somehow to the beneficiary so they can somehow utilise the franking credit benefit? Sounds complex having to set up loan accounts so anyone else who's come across a similar issue here in Australia that'd be willing to help me out would be very appreciated.

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Level 15

Australian Trust is given dividend as company shares with franking credits not in real hard cash.

"please don't answer "this is why people should use accountants they're not capable" type answers"

 

Okay, how about:

You are Capable, but asking very specific Accounting Rules from the internet, where you don't know if we, your Peers, are responding from Canada, France, the US or Mars.

 

As the Trustee and Bookkeeper, you have Skills. It helps to Respect that other Professional also have Skills. It is their job to help you keep your skills current and to expand on those skills you need to learn, or help you by explaining a scenario for which you might need very specific (Australian rules and regulations) help with.

 

"This year for the very first time my Australian Trust is given $664 worth of Australian publicly listed shares that also come with $285 in Australian franking credits instead of an actual real cash payment as its yearly dividend."

 

That's why the right answer is: Seek the guidance from a "chartered accountant" or whatever they are called. I am in the US, and I have 3 different CPAs from whom I seek guidance for this type of task. That's because the Rules and Regulations that control this type of scenario get updated, expire, affect each other, etc. They have to Stay current with these regulations, which is why they Are the right professional for me to review a scenario and get the Best guidance, for something new to me.

 

I teach this lesson as, "Maximizing the tax rules to our benefit."

 

I don't intend to Stay Current on the Trust Regulations and the Tax Rules. I already Have a profession that keeps me busy. Seeking guidance here is no different than seeking the guidance from the Person that will Know. Except, you would be getting the RIght Answser from someone who Knows your Requirements.

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