Non-assessable capital payments from a trust

Overview

It is quite common for a trust to make non-assessable payments to beneficiaries.

Note: the term 'trust' includes managed funds such as property and share trusts.

If a profit made by the trust is not assessable, any part of that profit distributed to a beneficiary will also be non-assessable in most cases - for example, a share of a profit made on the sale of property acquired by the trust before 20 September 1985.

However, if you receive non-assessable payments from a trust, you need to make cost base adjustments to your units or trust interest. Those adjustments will affect the amount of any capital gain or capital loss you make on the unit or interest (for example, when you sell it). If non-assessable payments exceed your cost base, you may also make a capital gain equal to that excess in the year it is paid to you.

	Capital loss You cannot make a capital loss from a non-assessable payment.
	Note As a result of some stapling arrangements, some investors in managed funds have received units which have a very low cost base. The payment of certain non-assessable amounts in excess of the cost base of the units will result in these investors making a capital gain.

Non-assessable payments under a demerger

If you receive a non-assessable payment under an eligible demerger, you do not deduct the payment from the cost base and the reduced cost base of your units or trust interest. Instead, you adjust your cost base and reduced cost base according to the demerger rules.

You may make a capital gain on the non-assessable payment if it exceeds the cost base of your original unit or trust interest, although you will be able to choose CGT rollover.

An eligible demerger is one that happens on or after 1 July 2002 and satisfies certain tests. The trust making the non-assessable payment will normally advise unit or trust interest holders if this is the case. For more information about demergers, see Demergers.