Family trust elections and franking credits: a review guide for accountants

The review question: the return reports $90,000 in franking credits allocated to beneficiaries, including $45,000 to one beneficiary. Has the election position been confirmed, and has the basis for the relevant beneficiary's claim been reviewed?

General information only, not tax or legal advice. Apply the relevant law and ATO guidance to the trust, beneficiary and income year. The checklist is a suggested review approach, not a prescribed legal procedure.

What is a family trust election?

An FTE is a voluntary tax election made by a trustee. The ATO explains that it is made in writing and in the approved form for a specified income year. Calling a trust a "family trust" in its name or deed does not itself establish that an effective election exists. (source 2)

For the reviewer, the practical distinction is between the description of the trust and the evidence of its tax election. Locate the relevant record rather than treating a file label as the answer.

Why do franking credits make the election position relevant?

The ATO's guidance on non-widely held trusts explains that, generally, shares must be held at risk by both trustees and beneficiaries for the franking tax offset to be available. The trust structure and any relevant FTE are part of that analysis. (source 1)

This is why reviewing only the arithmetic in a beneficiary schedule is not enough. The schedule can add up correctly while the supporting election evidence or eligibility analysis remains incomplete.

The ATO also identifies franking-credit claims by individual beneficiaries who do not meet the qualified-person rule or small-shareholder exemption as a trust-compliance concern. That is a reason for appropriate enquiries, not a prediction that any particular trust will be audited. (source 5)

An illustrative review example: $90,000 allocated. What does the file actually establish?

Illustrative scenario, adapted from figures in a Taxpartna review example. It does not report a verified client outcome or establish that a tax benefit was denied.

A trust review brings together the following information:

The numbers are a starting point. They do not reveal the beneficiary's entity type, whether an election exists in earlier records, whether it was effective for the relevant period, or what other franking credits the beneficiary received.

The first useful action is therefore an evidence request, not an automatic instruction to make an election or remove a credit.

Does a blank return field mean no FTE exists?

No. It shows that the election status has not been recorded in that field in the document being reviewed. The actual election record and relevant history need to be checked. The ATO's requirement for an election in writing and in the approved form is different from the question of whether the current return accurately records its status. (source 2)

A practical reviewer enquiry might request the election record, its specified income year and commencement details, the specified individual, relevant variations or revocations, and prior-year working papers. Those documents can help distinguish an omitted disclosure from an unresolved or absent election position.

Suggested review note: Election status is not confirmed from the supplied material. Obtain the relevant election record and confirm its effective period and consistency with the return before concluding on the franking-credit treatment.

Similarly, a zero displayed by a check because a return field is blank should not be described as independent proof that there are no losses anywhere in the trust's records. Preserve the distinction between a recorded amount, a missing field and a substantive tax conclusion.

The $5,000 concession and the beneficiary review

How does the $5,000 small-shareholder exception work?

The exception is for individuals. The relevant total is the individual's franking-credit tax offsets for the income year, from relevant company, trust and partnership sources, and must not exceed $5,000. Related-payment conditions still matter. The ATO sets out those general features in paragraphs 20 to 21 of Class Ruling CR 2025/22. (source 3)

The ruling itself concerns a specific Suncorp transaction. Its description of the exception helps explain the threshold; it is not a ruling approving the trust scenario in this article.

For this example, establish who the $45,000 allocation relates to before applying an individual exception. Do not use the trust's $90,000 total as a substitute for beneficiary-level analysis.

Does more than $5,000 automatically mean an FTE is required?

No. Exceeding the individual concession limit removes that particular shortcut; it does not, by itself, determine the correct treatment or prove that making an election is the appropriate response. The trust structure, relevant interests, election history and qualified-person position must be assessed. (source 1, source 3)

A useful review question is: what supports this beneficiary's claim, and is an effective FTE relevant to that support? That is more precise than applying a rule of "amount above threshold, therefore elect".

What should the reviewer obtain?

The following are suggested workpaper questions, not an assertion that Taxpartna currently automates every step.

Identify the beneficiary and reconcile the figures

Confirm the beneficiary's identity, entity type, relevant income year and allocation. Trace the amount between the final distribution workings, beneficiary statement and return. Where an individual exception is being considered, establish the relevant annual total rather than looking at this one source in isolation.

Review the investment evidence

Locate relevant dividend statements, transaction records and existing technical workpapers. Ask the responsible practitioner to assess the applicable holding-period, at-risk and related-payments issues, including whether the trustee's position and the beneficiary's position have both been addressed. (source 1, source 3)

Keep document consistency separate from eligibility

An amount agreeing across three documents is useful evidence of consistency. It is not a legal conclusion that the offset is available. Conversely, a missing document is a reason for enquiry, not an automatic finding of non-compliance.

An election is not an automatic fix

Why should family-group consequences also be considered?

Making an FTE can have consequences beyond the current franking-credit claim. The ATO warns that distributions outside the relevant family group can attract family trust distribution tax (FTDT) at 47%. Review the specified individual, relevant recipients and any interposed-entity issues before recommending a course of action. (source 4)

FTDT and franking-credit eligibility are distinct questions. A review should not describe a missing election as an established out-of-family distribution, or imply that making an election resolves every issue.

Do not assume an election can simply be backdated, varied or revoked to solve the example. Those matters require separate advice under the applicable conditions. An article or software flag is not a substitute for that advice.

What if the trust has no tax losses?

The displayed example reports zero losses, but the franking-credit question is still relevant. The ATO's franking-offset guidance addresses qualified-person requirements; it is not limited to files claiming trust losses. A loss check and a franking-credit review should therefore remain separate parts of the work. (source 1)

Family trust election and franking-credit review checklist

Adapt these prompts to the engagement. They are a practical way to organise evidence, not a mandatory ATO template or a list of automatically supported product checks.

Election evidence

• Identify the trust, trustee, relevant income year and operative deed documents.
• Locate the actual election record and relevant history; do not rely only on a return tick box.
• Record the specified individual, effective period and any relevant variation or revocation for practitioner assessment.
• Compare the supported election position with the final return disclosure.

Beneficiary and franking-credit evidence

• Identify each relevant beneficiary and entity type; trace allocated credits to supporting records.
• Where relevant, check the individual's annual total across sources before relying on the small-shareholder exception.
• Have the practitioner address applicable trustee and beneficiary qualified-person requirements.
• Identify any holding-period, at-risk, related-payment or other unresolved technical issue.

Consequences and review closure

• Assess relevant family-group and interposed-entity issues separately from offset eligibility.
• Record missing evidence, the enquiry owner and the next required action.
• Document the professional conclusion and update affected records where needed.
• Do not mark an unresolved material point as cleared merely because the software identified it.

Document the enquiry, not an assumed outcome

What should the review file note contain?

A concise record can explain the issue without repeating every workpaper. Record what was observed, which source was used, what evidence was requested and what remains unresolved. The conclusion should be added only when the responsible practitioner has reached it.

Illustrative open-item file note.

For a broader framework, see the tax review file note checklist. Link the final conclusion back to the evidence actually obtained, rather than using a generic "reviewed, OK" entry.

Where Taxpartna fits

Taxpartna supports review of completed tax files by bringing information in supplied workpapers and supporting documents together for practitioner assessment. The Family Trust Election Check example shows why that matters: a trust classification, an election-status field and a beneficiary allocation need to be considered together, not as unrelated entries.

A finding can direct the reviewer to the documents and amounts that need attention. It does not establish facts outside the submitted material, prove an election's validity or decide a beneficiary's legal entitlement.

The practitioner remains responsible for the enquiries, calculations, tax interpretation and final sign-off. Taxpartna does not guarantee compliance, make an election for the trustee or determine that a particular amount has been saved.

Illustrative article finding, not a production screenshot. Review required: family trust election and franking-credit eligibility. The return reports $90,000 of allocated franking credits, including $45,000 to one beneficiary, and an uncompleted election-status field. Confirm the election history and relevant beneficiary eligibility. Record the conclusion before sign-off. This flag does not establish that the credits are unavailable.

See how this fits into trust tax return review. For the surrounding document checks, use the trust distribution review checklist.

Frequently asked questions

Review the evidence before closing the file

The practical aim is not to turn a threshold into an automatic conclusion. It is to connect the trust documents, election evidence, beneficiary records and professional assessment before the file is signed off.

Sources and further reading

Source 3 is a transaction-specific ruling cited only for its description of the small-shareholder exception; its transaction outcome does not apply to this illustration. An accessible copy of the ruling is published by Suncorp Group.

• 1. ATO: Non-widely held trusts and the franking tax offset
• 2. ATO: Family trusts
• 3. ATO: Class Ruling CR 2025/22, paragraphs 20 to 21
• 4. ATO: Family trusts: tips for electing entities
• 5. ATO: Trust activities that attract our attention

General information only. This page does not provide tax or legal advice or establish eligibility for an offset. The practitioner must apply current authority to the actual facts. Taxpartna is a quality-assurance assistance platform, not a substitute for professional judgement.