Are your clients’ franking credits at risk?

Woman With Family Sitting On Sofa In Background At Home

Have you closely considered whether your testamentary trust client requires a Family Trust Election (FTE)?

On 14 December 2013, the Government announced that it would not proceed with long-proposed amendments to relax the application of the “45 day holding rule” for beneficiaries of testamentary trusts. Therefore, an FTE will almost certainly be required if an income beneficiary of a testamentary trust wishes to claim an amount of franking credits exceeding the “small investor limit” ($5,000).

It is critical to remember that the $5,000 small investor limit takes into consideration franking credits from all sources – not just those forming part of the income distributed from the testamentary trust. Therefore, you should closely monitor income beneficiaries who derive franked dividends from multiple sources.

If you are considering putting an FTE in place for a testamentary trust, it is imperative to determine the most appropriate test individual . This selection is critical as it will determine the context of the family control test as well as which family members will be covered by the FTE.

For assistance in determining whether your client requires an FTE please speak to us on (07) 3223 6100.

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