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This section explains how distributions from trusts (including managed funds) can affect your CGT position. Managed funds include property trusts, share trusts, equity trusts, growth trusts, imputation trusts and balanced trusts.
Distributions from trusts can include different amounts but only the following types of amounts are relevant for CGT purposes:
- distributions of all or a part of the trust's income where the trust’s net income for tax purposes includes a net capital gain
- distributions or other entitlements described as being referable to a specific capital gain or gains
- distributions of non-assessable amounts.
You are treated as having made a capital gain or gains if you are 'specifically entitled' to all or part of a trust's capital gain and that capital gain is reflected in the trust's net income for tax purposes.
Additionally, if there is an amount of a capital gain reflected in the net income of the trust for tax purposes to which no entity is specifically entitled, that amount will be proportionately assessed to beneficiaries in accordance with their 'adjusted Division 6 percentage' (which is based on their proportionate entitlement to certain income of the trust), or otherwise to the trustee.
In certain circumstances where you would be treated as having made a capital gain but are unable to benefit from the gain within a set period, an eligible trustee may elect to be assessed on the capital gain on your behalf.
In June 2011, amendments were enacted that enable the streaming of capital gains and franked dividends to beneficiaries, subject to relevant integrity provisions. For managed investment trusts (MITs) which have not previously made an election to apply the amendments, the amendments start to apply from 2017–18. For MITs which have previously made an election to apply the amendments, the amendments continue to apply in 2017–18 and later income years.
These amendments do not apply to MITs that are attribution managed investments trusts (AMITs). They are subject to the separate attribution rules that enable capital gains and franked distributions to be attributed to members for tax purposes.
Non-assessable payments mostly affect the cost base of units in a unit trust (including managed funds) but can in some cases create a capital gain. Non-assessable payments to beneficiaries of a discretionary trust will not give rise to capital gains.
Trustees, including fund managers, may use different terms to describe the methods of calculation and other terms used in this guide. For example, they may use the term ‘non-discount gains’ when they refer to capital gains worked out using the indexation and 'other' methods.