Part C - Distributions from managed funds
Chapter C1 How to work out your capital gains tax for a managed fund distribution
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
End of attention
Some terms in this section may be new to you. These words are explained in Definitions.
If your managed fund distribution (as advised by the fund) includes a capital gain amount, you include this amount at item 17 Capital gains. You do not include capital gains at item 12 Partnerships and trusts.
Examples of managed funds include property trusts, share trusts, equity trusts, growth trusts, imputation trusts and balanced trusts.
Distributions from managed funds can include two types of amounts that affect your CGT obligation:
- capital gains, and
- non-assessable payments.
The following steps in this section show you how to record a capital gain distributed from a managed fund. Chapter C2 covers non-assessable amounts which mostly affect the cost base of units but can create a capital gain.
Step 1 Work out the capital gain you have received from the managed fund
You need to know whether you have received any capital gain in your distribution - to find out, check the statement from your managed fund.
This statement should also show which method the fund has used to calculate the gain - the indexation, discount or 'other' method. You must use the same method(s) as the fund to calculate your capital gain. (These methods are explained in part A and part B, and in Definitions.)
Fund managers may use different terms to describe the calculation methods and other terms used in this guide. For example, they may refer to capital gains calculated using the indexation method and 'other' method as non-discount gains.
Step 2 Gross up any discounted capital gain you have received
If the fund has applied the CGT discount to your distribution, this is known as a discounted capital gain.
You need to gross up any discounted capital gain distributed to you by multiplying the gain by two. This grossed-up amount is your capital gain from the fund. If the managed fund has shown the grossed-up amount of the discounted capital gain on your distribution statement, you can use that amount.
Tim received a distribution from a fund that included a discounted capital gain of $400. Tim's statement shows that the fund had used the discount method to calculate the gain.
Tim grosses up the capital gain to $800 (that is, $400 x 2).
Step 3 Work out your total current year capital gains
Add up all the capital gains you received from funds (grossed up where necessary) together with any capital gains from other assets. Write the total of all of your capital gains for the current year at H item 17.
If you have any capital losses, do not deduct them from the capital gains before showing the total amount at H.
Tim's fund also distributed a capital gain of $100 calculated using the other method. Tim shows $900 ($800 + $100) at H item 17 on his tax return (supplementary section).
Step 4 Applying capital losses against capital gains
If you have no capital losses from assets you disposed of this year and no unapplied net capital losses from earlier years, go to step 5.
If you made any capital losses this year, deduct them from the amount you wrote at H. If you have unapplied net capital losses from earlier years, deduct them from the amount remaining after you deduct any capital losses made this year. Deduct both types of losses in the manner that gives you the greatest benefit.
Deducting your losses
You will probably get the greatest benefit if you deduct capital losses from capital gains distributed from the fund in the following order:
- capital gains calculated using the 'other' method
- capital gains calculated using the indexation method, and then
- capital gains calculated using the discount method.
If the total of your capital losses for the year and unapplied net capital losses from earlier years is greater than your capital gains for the year, go to step 7.
If Tim had a capital loss of $200 when he sold another CGT asset, he deducts his capital loss ($200) from his capital gain ($900) and arrives at $700. As he applied the loss first against the capital gain calculated using the 'other' method and then against the capital gain calculated using the discount method (after grossing it up), Tim can apply the CGT discount to the remaining $700.
Losses from personal use assets and collectables
Capital losses from collectables and unapplied net capital losses from collectables from earlier years can only be used to reduce capital gains from collectables. Losses from personal use assets must be disregarded. Jewellery, art and antiques are examples of collectables. Personal use assets are assets mainly used for personal use that are not collectables - such as a boat you use for recreation. See the Guide to capital gains tax 2004-05 for more information.
Step 5 Applying the CGT discount
If you have any remaining grossed-up discount capital gains you can now apply the CGT discount - if applicable - and reduce them by 50%.
Remember, you cannot apply the CGT discount to capital gains distributed from the fund calculated using the indexation or 'other' method.
Tim has deducted his capital losses (including any unapplied net capital losses from earlier years) from his capital gain. He now reduces the amount remaining by 50%:
= $700 x 50%
Tim has a capital gain of $350.
Step 6 Show your net capital gain
Show at A item 17 the amount remaining after completing steps 1-5. This is your net capital gain for the year. Ignore step 7.
Tim shows $350 at A item 17 on his tax return (supplementary section).
Step 7 Work out your carry-forward losses
If the total of your capital losses for the year and unapplied net capital losses from earlier years is greater than your capital gains for the year, you were directed to this step from step 4.
Do not put anything at A on your tax return (supplementary section).
At V show the amount by which the total of your capital losses for the year and net capital losses from earlier years exceeds your capital gains for the year. You carry this amount forward to be applied against later year capital gains.
For more information about CGT and managed fund distributions, see the Guide to capital gains tax 2004-05.
Last modified: 06 Oct 2009QC 27583