Case: Franked dividends received by the trust do not directly appear on the trust return as income to the trust; instead, they flow through to the beneficiaries.
Note: When a company pays dividends to a trust that has multiple beneficiaries,it is important to correctly manage the flow of this income through the trust to the beneficiaries to ensure accurate reporting in both the company and trust tax returns.
Solution:
Step 1: Set Up the Share Register
Navigate to Company’s Tools > Share Registers > Shareholders.
Select the trust as the shareholder.
Mark "Shares are beneficially held" as Yes.
Do not enter any beneficiaries’ names at this stage.
This ensures the dividends flow directly to the trust, not individual beneficiaries.
Step 2: Add the Dividends
Record the dividends under the company.
Since no beneficiary is attached, the entire dividend amount will flow directly into the Family Trust.
These dividends will then appear in the Trust Tax Return under:
Income > Dividend section.
Step 3: Allocate Dividends to Beneficiaries
Open the Trust’s Tax Return.
Go to the Beneficiary section.
Manually distribute the dividend income to each beneficiary according to the trust’s distribution resolution.
Key Point:
Dividends paid by a company to a Family Trust are first received entirely by the trust, not distributed directly to individual beneficiariesthrough the Trust Tax Return > Beneficiary section
These dividends are declared as income of the trust in the trust tax return.
Distribution of the dividend income and associated franking credits to individual beneficiaries is then done manually or by percentage through the Trust Tax Return, specifically within the Beneficiary section.