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Part C: Distributions from managed funds

Last updated 5 October 2009

Chapter C1 How to work out your capital gains tax for a managed fund distribution

Note: New terms

Some terms in this section may be new to you. They have been printed in red the first time they are used (mostly in earlier sections) and are explained in Explanation of terms.

Reminder: 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 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 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.

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, part B and Explanation of terms at the back of this guide.)

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 gross 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.

Example

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 example

Note: Generally a managed fund will not have qualified for the 50% small business CGT reduction. However if it did qualify for that concession (after you apply the CGT discount) multiply the gain by four.

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.

Example

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.

End of example

Step 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 able to carry forward to this year, go to step 5.

If you had capital losses (including net capital losses from earlier years) deduct them from your capital gains (the amount you wrote at H). You may do this in the order that gives you the greatest benefit.

Offsetting 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:

  1. capital gains calculated using the 'other' method
  2. capital gains calculated using the indexation method, and then
  3. capital gains calculated using the discount method.

If your capital losses (including net capital losses from earlier years) are greater than your capital gains, go to step 7.

Example

If Tim had a 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.

End of example

Note: Losses from personal use assets and collectables

Remember a net capital loss from collectables can only be used to reduce capital gains from collectables. Losses from personal use assets must be disregarded. Refer to the Guide to capital gains tax for more information.

Step 5 Applying the CGT discount

If you have any remaining grossed up 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.

Example

Tim has applied his capital losses (including net capital losses from earlier years) to his capital gain. He now reduces the amount remaining by 50%:

$700 × 50% = $350

Tim has a capital gain of $350.

End of example

Step 6 Work out 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.

Example

Tim shows $350 at A item 17 on his tax return.

End of example

Step 7 Work out your carry-forward losses

If your capital losses (including net capital losses from earlier years) were greater than your capital gains, you were directed to this step from step 4.

If you have capital losses (including net capital losses from earlier years) remaining, you should show '0' (zero) at A.

At V show the amount by which your capital losses (including net capital losses from earlier years) are greater than your capital gains. You carry these capital losses forward to be applied against later year capital gains.

For more information about CGT and managed fund distributions, get the publication Guide to capital gains tax.

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