Can a Trust Distribute Franking Credits to Someone Other than the Dividend Recipient?

No.

Franking credits are not income as defined in the tax acts nor are they assets of a trust. They therefore cannot be allocated to someone, but they must flow out as directed by Division 207 of the ITAA36.

It was previously thought that the franking credits could be distributed separately but this ‘bifurcation assumption’ was recently held be to be legally ineffective by the High Court in the case of Federal Commissioner of Taxation v Thomas [2018] HCA 31

Written by Terry Waugh, Solicitor at www.structuringlawyers.com.au