After you’ve made the tax planning adjustments, the Subtotal After Tax Planning Adjustments is calculated. You can then make distributions of income before looking at a final estimation of tax and taxable income.
Example
We have a discretionary trust/family trust with $10,000 of income.
It can be distributed outside of the group by selecting Distribute Income To and Outside of Group and entering $7,000 income and $3,000 of franking credits, which might be allocated to a grandparent. Click Save. That taxable income is taken out of the whole system.
Let's say, instead, that income is going to be allocated to Mum because she is on the lower taxable income compared to Dad. Click on Distribute Income To > Mum and enter $7,000 and $3,000. These amounts have to add up to the taxable income – there's no taxable income left for the trust, naturally, but now $7,000 and $3,000 have gone out to Mum.
Making more distributions
Example
Let's say that we want to pay a dividend from the trading company out to Mum.
Select Distribute Income To, make a dividend to Mum, and click Save. Doing this does not affect the taxable income of the company being an after-tax dividend, but now it adds on to the taxable income of Mum.
Multiple Distributions
Example
Let's say that we want to do a partial distribution to Mum. We've still got taxable income, but we can make a distribution of the balance to Dad. Whatever distributions are made add to the taxable income of Mum and Dad. The franking credits they receive flow through to them as well.
In TaxPlan, you can make as many distributions of profit as you want from trusts, partnerships, or unit trusts to any entities at all, whether it’s a super fund, an individual, or a company. Companies can also make dividend payments.