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  • Chapter C3:  Worked examples for managed fund distributions

    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

    The following worked examples take the steps explained in chapter C1 and put them into different scenarios to demonstrate how they work.

    If you have received a distribution from a managed fund, you may be able to apply one or more of these examples to your circumstances to help you work out your capital gains tax for 2000-01 and complete item 17.

    Example 1

    Bob has received a non-assessable amount

    Bob owns units in OZ Investments Fund which distributed income to him for the year ending 30 June 2001. The fund gave him a statement showing he had received $550 assessable income, including the following capital gains:

    • $100 using the discount method (grossed-up amount $200)
    • $75 using the indexation method, and
    • $28 using the 'other' method.

    These capital gains add up to $203.

    The statement shows Bob's distribution did not include a tax free amount but it did include $105 tax deferred amount.

    From his records, Bob knows that the cost base and reduced cost base of his units are $1,200 and $1,050 respectively.

    Bob has no other capital gains or losses for the 2000-01 income year.

    Bob follows these steps to work out the amounts to show on his tax return.

    Bob works out how much of the fund distribution to show as income by deducting the total of the capital gains on his statement from the total assessable income distributed to him:

    $550 -− $203 = $347.

    Bob shows the $347 at item 12-Partnerships and trusts.

    As Bob has a capital gain which the fund reduced under the CGT discount of 50% ($100), he includes the grossed up amount ($200) in his total current year capital gain.

    So Bob adds the grossed up amount to his indexed method and 'other' capital gains to work out his total current year capital gains:

    $200 + $75 + $28 = $303

    As Bob has no other capital gains or losses, his net capital gain is the amount of capital gain included in his distribution from the fund ($203).

    Bob completes item 17 as follows:

    17 Capital gains
Label G Did you have a CGT event during the year? Yes
Label A Net capital gain: $203
Label H Total current year capital gains: $303
Label V Net capital losses carried forward to later income years: nil

    End of example

    Records to keep

    The tax deferred amount Bob received is not included in his income or his capital gains, but it affects the cost base and reduced cost base of his units in OZ Investments Fund for future income years.

    Bob did not deduct any capital losses from his discount method capital gains, so he deducts the tax deferred amount from both the cost base and reduced cost base of his units as follows:

    Cost base

    $1,200

    less tax-deferred amount

    $105

    New cost base

    $1,095

    Reduced cost base

    $1,050

    less tax-deferred amount

    $105

    New reduced cost base

    $945

    Example 2

    Ilena's capital loss is greater than her non discounted capital gain

    Ilena invested in XYZ Managed Fund. The fund makes an income distribution of $400 to Ilena for the year ending 30 June 2001 and provides her with a statement that shows her distribution included:

    • $65 discounted capital gain, and
    • $90 non discounted capital gain.

    The statement shows Ilena's distribution also included:

    • $115 tax-deferred amount, and
    • $35 tax-free amount.

    Ilena has no other capital gains but made a capital loss of $100 on some shares she sold during the year.

    From her records, Ilena knows the cost base and reduced cost base of her units are $5,000 and $4,700 respectively.

    Ilena has to treat the capital gain component of her fund distribution as if she made the capital gain. To complete her tax return, Ilena must identify the capital gain component of her fund distribution and work out her net capital gain.

    Ilena follows these steps to work out the amounts to show at item 17.

    To work out how much of the fund distribution to show as income, Ilena subtracts the total of the capital gains on her statement from the income distribution:

    $400 − ($65 + $90) = $245.

    Ilena shows the $245 at item 12-Partnerships and trusts.

    As Ilena has a $65 capital gain which the fund reduced by the CGT discount of 50%, she must gross up the capital gain. She does this by multiplying the amount of the discounted capital gain by two:

    $65 × 2 = $130

    Ilena adds her grossed up and non-discounted capital gains to work out her total current year capital gains:

    $130 + $90 = $220

    She shows her total current year capital gains ($220) at label H item 17.

    After Ilena has grossed up the discounted capital gain received from the fund, she subtracts her capital losses from her capital gains.

    Ilena can choose which capital gains she subtracts the capital losses from first. In her case, she will receive the best result if she:

    • first subtracts her capital losses from her non discounted capital gains:

    $90 − $90 = $0

    • then subtracts any remaining capital losses from her grossed-up gains:

    $130 − $10 = $120

    Ilena applies the CGT discount of 50% to the remaining grossed up capital gains:

    $120 − ($120 × 50%) = $60

    Ilena adds up the capital gains remaining after applying the CGT discount. The total is her net capital gain:

    $60 + $0 = $60

    Ilena completes item 17 as follows:

    17 Capital gains
Label G Did you have a CGT event during the year? Yes
Label A Net capital gain: $60
Label H Total current year capital gains: $220
Label V Net capital losses carried forward to later income years: nil

    End of example

    Handy hint

    A CGT concession amount received before 1 July 2001 will be treated in the same way as a tax-deferred amount.

    Records to keep

    The tax-deferred and tax-free amounts Ilena received are not included in her income nor her capital gain, but the tax-deferred amount affects the cost base and reduced cost base of her units in XYZ Managed Fund for future income years. The tax free amount affects her reduced cost base.

    Ilena deducted $10 capital losses from her grossed up capital gain before she applied the CGT discount of 50%. In effect, $5 of the tax deferred amount was offset against her capital losses. So she reduces the tax deferred amount by $5 and deducts the remainder ($110) from the cost base and reduced cost base of her units as follows:

    Cost base

    $5,000

    less tax-deferred amount

    $110

    New cost base

    $4,890

    Reduced cost base

    $4,700

    less tax deferred amount ($110) + tax free amount ($35)

    $145

    New reduced cost base

    $4,555

    Last modified: 06 Oct 2009QC 16182