Streaming Trust Income

One of the main advantages of a discretionary trust is their ability to decide at June 30th each year, who to distribute the trust taxable income to. This flexibility can result in tax savings where income is distributed to beneficiaries in lower tax brackets.

Streaming trust income involves streaming fully franked dividends or capital gains to specific beneficiaries so the overall tax payable on the trust income is minimized. So, for example the trust could allocate the $50,000 capital gain to beneficiary A, and $20,000 franked dividends to beneficiary B.

For the streaming of fully franked dividends or capital gains to specific beneficiaries to be effective for tax purposes the trust distribution minute (which includes the streaming details) must be signed prior to 30th June of the relevant financial year.

There will be tax savings where a capital gain is allocated to a beneficiary with capital losses carried forward. The capital losses absorb the capital gains so can result in no tax payable on the capital gains.

The fully franked dividends are often streamed to beneficiaries on low taxable incomes so that some or all of the franking credits are refunded by the ATO.