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  • Bonus units

    If you've received bonus units on or after 20 September 1985, you may make a capital gain when you dispose of them.

    The capital gains tax (CGT) rules for bonus units in managed funds are very similar to those for bonus shares.

    When the unit trust issues the bonus units, they will generally tell you what amount (if any) you have to include in your assessable income for that year. You also need to keep this information to work out your CGT obligation when you dispose of the shares.

    On this page:

    Where no amount is included in assessable income

    Original units acquired on or after 20 September 1985

    If your bonus units relate to other units that you acquired on or after 20 September 1985, your bonus units are taken to have been acquired on the date you acquired your original units. If you have original units that you acquired at different times, you will have to work out how many of your bonus units are taken to have been acquired at each of those times.

    Calculate the cost base and reduced cost base of the bonus units by apportioning the cost base and reduced cost base of the original units over the original units and the bonus units. Effectively, this results in a reduction of the cost base and reduced cost base of the original units. You also apportion any calls paid on partly paid bonus units between the cost bases (and reduced cost bases) of the original units and the bonus units.

    Original units acquired before 20 September 1985

    The rules that apply if you acquired your original units before 20 September 1985 depend on when the bonus units were issued and whether they were partly paid or fully paid.

    Fully paid units

    If the bonus units are fully paid, the acquisition date of the bonus units is the date you acquired the original units. Therefore, if you acquired the original units before 20 September 1985, any capital gain or loss you make from the sale of the bonus units is disregarded.

    Partly paid units

    • For partly paid up bonus units issued on or after 10 December 1986
      • if you've made a call payment, the acquisition date for the bonus units is the date when the liability to pay the amount arose. The cost of acquiring them includes their market value just before that date plus the amount of call payments
      • if you haven't paid any amount subsequently for the bonus shares, the date of acquisition is also the date you acquired the original units.
       
    • For partly paid up bonus units issued before 10 December 1986, the date of acquisition is the date you acquired the original units, irrespective of whether you've paid any amount subsequently.

    Example: Unit trusts

    Sarah is a unit holder in the CPA Unit Trust. She bought 1,000 units on 1 September 1985 for $1 each and 1,000 units on 1 July 1996 for $2 each.

    On 1 March 1997, the unit trust made a one-for-one bonus unit issue to all unit holders. Sarah received 2,000 new units. She didn't include any amount in her assessable income as a result.

    The 1,000 new units issued for the original units she acquired on 1 September 1985 are also treated as having been acquired on that date and are therefore not subject to CGT.

    However, the 1,000 new units issued for the original units she acquired on 1 July 1996 are subject to CGT. Their cost base is worked out by spreading the cost of the original units ($2,000) acquired on that date over both the original units and the bonus units. Each of the units therefore has a cost base of $1.

    End of example

    Where an amount is included in assessable income

    If you include any amount in your assessable income as a result of the issue of bonus units, their acquisition date is the date they were issued, regardless of when you acquired the original units.

    The cost base and reduced cost base of the bonus units is the amount included in your assessable income as a result of the issue of those units, plus any calls you made if they were only partly paid.

    If the bonus units were issued before 20 September 1985, any capital gain or loss is disregarded as they are pre-CGT assets.

    Work out the correct treatment of your bonus units

    To work out the correct treatment of your bonus units, work through the following questions.

    1. Did you acquire the original units on or after 20 September 1985?

    Yes: Go to question 2

    No: Go to question 3

    1. Is any part of the bonus units included in your assessable income?

    Yes: See answer 1

    No: See answer 2

    1. Is any part of the bonus units included in your assessable income?

    Yes: Go to question 4

    No: Go to question 5

    1. Were the bonus units issued on or after 20 September 1985?

    Yes: See answer 1

    No: See answer 4

    1. Are the bonus units partly paid?

    Yes: Go to question 6

    No: See answer 4

    1. Were the bonus units issued before 10 December 1986?

    Yes: See answer 4

    No: Go to question 7

    1. Before the sale of the bonus units were any further call payments made to the trust?

    Yes: See answer 3

    No: See answer 4

    Answer 1

    • The bonus units are subject to CGT.
    • The acquisition date of the bonus units is their date of issue.
    • The cost base includes the amount included in assessable income, plus any calls on partly paid bonus units.

    Answer 2

    • The bonus units are subject to CGT.
    • The bonus units are acquired when the original units were acquired.
    • The cost base of each original and bonus unit is equal to the cost of the original units divided by the total number of original and bonus units plus any calls on partly paid bonus units.

    Answer 3

    • The bonus units are subject to CGT.
    • The acquisition date of the bonus units is the date when the liability to pay the first call arises.
    • The cost base is the market value of the bonus units just before the liability to pay the first call arises, plus the amount of call payments made.

    Answer 4

    You are taken to have acquired the bonus shares before 20 September 1985 and they are not subject to CGT.

    See also:

    Last modified: 29 Jun 2018QC 52218