What will happen to my franking credits under the new trust rules?

June 24, 2026 — 5:07am

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My wife and I have a discretionary family trust whose only income is fully franked dividends from Australian shares. The trust distributes that income equally between us, and we include both the dividends and the franking credits in our personal tax returns.

The Federal Budget proposes a flat 30 per cent tax on discretionary trust income, subject to the legislation passing Parliament. If these changes become law, how will fully franked dividends be treated? Will the franking credits first offset the trust’s 30 per cent tax, or will the distributions we receive still carry franking credits that we can claim in our own tax returns?

Mark Molesworth, tax partner at BDO, says that at present we only have the budget announcement to work from, so you should review your situation once the detailed legislation becomes available.

Based on the announcements, it appears that the franking credits attached to dividends received by the trust will be used to help pay the trust’s minimum 30 per cent tax on its income. When the trust distributes income to you, that distribution will carry non-refundable credits representing the tax already paid by the trust.

In other words, you and your wife will probably still receive credits, but they will no longer be refundable franking credits. Instead, they will be non-refundable trustee tax credits.

I’m 42. Should I really be putting all my money into my super?

Paul BensonMoney contributor

This may not have a major impact on you because you say you have other income in your personal names on which you pay tax, and the non-refundable credits can be used to offset that liability. However, if you currently receive refunds of excess franking credits through the trust, those refunds may cease from the 2028-29 financial year, when........

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