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  • Records to keep

    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 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

    $1200

    less tax-deferred amount

     $105

    New cost base

    $1095

    Reduced cost base

    $1050

    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 $5000 and $4700 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 x 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 x 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:

    Label G Yes

    Net capital gain-Label A $60

    Total year capital gains-Label H

    $220

    Handy hint

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

    Last modified: 06 Oct 2009QC 16182