Chapter C1 - How to work out your capital gains tax for a managed fund distribution
Examples of managed funds include property trusts, share trusts, equity trusts, growth trusts, imputation trusts and balanced trusts.
Distributions from managed funds can include 2 types of amounts that affect your CGT obligation:
- capital gains
- non-assessable payments.
The following steps in chapter C1 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.
Note-New terms
We may have used some terms that are not familiar to you. The first time these words are used, they are linked to their entry in Explanation of terms.
Handy hint: If your managed fund distribution (as advised by the fund) includes a capital gain amount, you show this amount at item 17-Capital gains. You do not show capital gains at item 12-Partnerships and trusts.
Handy hint: 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 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.
These methods are explained in part A, part B and Explanation of terms.
Handy hint: You must use the same method(s) as the fund to calculate your capital gain.
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 2. This enables you to reduce your grossed up capital gain by your capital losses and then later discount the reduced gain.
Note: Generally a managed fund will not have qualified for the 50 per cent small business CGT reduction. However if it did qualify for that concession in addition to the CGT discount you should multiply the gain by 4.
Handy hint: 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 × 2).
End of exampleStep 3 Complete H item 17
You need to show the total of your capital gains at H. If you have more than one capital gain, including a distribution from a fund, you should add all those amounts.
If you have any capital losses from other assets, do not deduct them from the capital gains when showing the total amount at H.
Example
Tim shows $800 at H item 17 on his tax return.
End of exampleStep 4 Applying capital losses against capital gains
If you have no capital losses from assets you disposed of this year and no net capital loss from an earlier year that you were told to carry forward to this year, go to step 5.
Otherwise, from the total of your capital gains, you can now deduct your capital losses. You may do this in the order that gives you the greatest benefit.
If your capital losses are greater than your capital gains, go to step 7.
Example
If Tim had a loss of $200 when he sold his shares, he deducts the $200 from the $800 grossed-up amount to arrive at $600. He applies the CGT discount to this $600.
End of exampleHandy hint: The greatest benefit is probably to 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.
Step 5 Applying the CGT discount
Where available, you can now apply the CGT discount to any remaining grossed-up capital gains by reducing the capital gains by 50 per cent.
Example
Tim calculates 50 per cent of his capital gain (after applying capital losses) to which the CGT discount can apply:
$600 × 50% = $300
Tim has a capital gain of $300.
End of exampleNote-Applying the CGT discount
Remember, you cannot apply the CGT discount to capital gains distributed from the fund calculated using the indexation or 'other' method.
Step 6 Work out your net capital gain-A item 17
At A you show the total of your capital gains after applying any capital losses (step 4) and then applying the CGT discount to any part of your capital gain that is eligible (step 5).
Show the result at A.
Example
Tim shows $300 at A item 17 on his tax return.
End of exampleStep 7 Work out your carry-forward losses-V item 17
If your capital losses were greater than your capital gains, you were directed to this step from step 4.
If you have capital losses remaining, you should show '0' (zero) at A.
At V, show the amount by which your capital losses are greater than your capital gains. You can now carry these capital losses forward to later years, until you have capital gains against which you can deduct these capital losses.
Information: For more information about CGT and managed fund distributions, get the publication Guide to capital gains tax.