Interim guidance on preparation of 2016 unit trust distribution statements

We have been consulting with industry bodies on the application of subsection 104-71(4) table item 7 in determining the tax deferred and CGT Concession components of unit trust distributions. The ATO expects to release its interpretation of this provision as a Draft Tax Determination (DTD) in the near future for the broader consideration and comment of other interested parties.

The ATO is providing interim guidance on its proposed interpretation of the law to trustees of unit trusts now. This will allow them to consider their own approach, under self-assessment principles, in determining distribution components and capital gains and losses for income years ending on or after 30 June 2016 in respect of unit trust interests. 

The date of effect of the ATO view will be determined as part of the process of issuing the DTD, receiving comments and issuing the Tax Determination as a final ATO view of the law.

Also relevant to determining the date of effect and the ATO’s administrative and compliance approach where our finalised position differs from taxpayer’s self–assessment bases will be the fact that this matter has been drawn to the attention of trustees and their advisers through the publication of this guidance and through prior consultations with industry bodies.

In summary, where the trustee of a unit trust has applied capital losses against its own direct gross capital gains and then distributes those gains, the trustee will need to determine the assessable, CGT concessional and tax deferred components of the distributed gains. The ATO considers that the part of the direct gains which have been sheltered or offset by the losses would be categorised as tax deferred distributions and would not be treated as CGT concessional amounts.  This means such amounts are received as non-assessable amounts that reduce the cost base or reduced cost base of the unitholder’s interest in the trust under CGT event E4.

Trustees can otherwise reasonably rely on distribution statements from other trusts for the purpose of preparing their own distribution statements to unitholders.  This does not preclude the possibility that later adjustments could be needed, but these would be subsequently notified by “upstream” distributing trustees if later adjustment became necessary.

The ATO will keep trustees informed on the development of the ATO interpretative and administrative positions through updates to this guidance.

    Last modified: 08 Jun 2016QC 49295