Question: In the Tax Return of an individual they received Franked Distributions from Trusts. Then, I recognised the franking credits to those distributions. It doesn't Gross up in the Taxable Income and only recognises the Franked Distributions from Trusts in Taxable Income. It does offset the Franking Credit in Tax Payable, but it should be including the amount from Franking Credits paid via Managed Funds as part of the Taxable Income.
Answer: Share of Franking credits from managed funds should not be included in Total income. This is a mandatory rule for ATO and they will not allow to lodge ITR otherwise.
The franking credit can be included in Franked distribution from trust in order to be included in assessable income - https://www.ato.gov.au/Individuals/Tax-return/2022/Supplementary-tax-return/Income-questions-13-24/13-Partnerships-and-trusts-2022/
