• Step 2 Capital gain you are taken to have made

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If you are a beneficiary who is entitled to a share of a trust's net capital gain you are taken to have made the following extra capital gains in addition to those you have made from CGT events.

    You may be a beneficiary who is entitled to a share of the income of a trust that includes a capital gain reduced by the CGT discount or the small business 50% active asset reduction. In this case, you need to gross up the capital gain by multiplying it by two. This grossed-up amount is an extra capital gain.

    You multiply by four your share of any part of the net capital gain from a trust that the trust has reduced by both the CGT discount and the small business 50% active asset reduction. This grossed-up amount is an extra capital gain.

    If you are entitled to any part of the net capital gain from a trust that the trust has not reduced by one of these concessions, then that amount is an extra capital gain.

    No double taxation

    You are not taxed twice on these extra capital gains because you did not include your capital gains from the trust at item 12 on your tax return. You can apply the CGT discount to trust gains calculated using the discount method after you have applied your capital losses.

    These extra capital gains are taken into account in working out your net capital gain for the income year. You include them at step 2 in part B or part C.

    Example - Distribution where the trust claimed concessions

    Serge is a beneficiary in the Shadows Unit Trust. He receives a distribution of $2,000 from the trust. This distribution includes $250 of net income remaining after a $1,000 capital gain made by the trustee was reduced by the CGT discount and the small business 50% active asset reduction.

    Serge has also made a capital loss of $100 from the sale of shares.

    He calculates his net capital gain as follows:

    Gross up the share of the trust's net
    capital gain ($250) by multiplying by 4

    $1,000

    Deduct capital losses

    $100

     

    $900

    Apply the CGT discount of 50%

    $450

     

    $450

     

     

    Apply the 50 per cent active asset reduction

    $225

    Net capital gain

    $225

    Serge will show $1,000 at H item 17 on his tax return, which is his total current year capital gain. His net capital gain to be shown at A item 17 on his tax return is $225. He will show a trust distribution of $1,750 ($2,000 - $250) at U item 12 on his tax return.

    End of example

    Applying the concessions

    Remember that you must use the same method as the trust to calculate your capital gain.

    This means you cannot apply the CGT discount to capital gains distributed to you from the trust calculated using the indexation method or 'other' method.

    Also, you can only apply the small business 50% active asset reduction to grossed-up capital gains to which the trust applied that concession.

    Last modified: 04 Mar 2016QC 27527