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Investors in Managed Funds

Last updated 7 July 2015

If you are a unit holder in a managed fund and have received a distribution from a trust whose net income for tax purposes includes a net capital gain, you take your share of that net capital gain into account in working out your own net capital gain for the year, to the extent that it does not exceed the overall net amount of your share of the trust's net income for tax purposes (see examples 18 and 19).

Note that if your statement shows that your share of the trust’s net capital gain is more than the overall net amount of your share of the trust’s net income for tax purposes, then there is a limit on the amount of the capital gain component excluded from U item 13 on your tax return (supplementary section). In this situation you cannot exclude an amount greater than the overall net amount of your share of the trust’s net income for tax purposes (see examples 18 and 19). The amount of your share of the trust’s net capital gain actually excluded from the amount at U item 13 is used in working out your capital gain. If you receive a distribution from more than one trust, this applies to each distribution.

Trust distributions to which the CGT discount or the small business 50% active asset reduction apply

If you are a unit holder in a managed fund your statement of distribution or advice from the trust should tell you your share of each capital gain that was included in the trust’s net capital gain. It should also advise you whether any discounts or reductions were applied by the trustee in determining the amount of the capital gain.

If you have a share of a trust’s net capital gain you are taken to have made extra capital gains in addition to any other capital gains you may have made from your own CGT events.

These extra capital gains are taken into account in working out your net capital gain for the income year. You include them at step 2 in part B or part C.

You need to know whether the trustee applied any discounts or reductions in calculating the capital gain to which your share relates in order to work out the correct amount to include in your own net capital gain calculation.

Where the trustee reduced one or more capital gains by the CGT discount or the small business 50% active asset reduction, you need to gross up your share of any such capital gain by multiplying it by two. This grossed-up amount is your extra capital gain that you include in your own net capital gain calculation.

You multiply by four your share of any capital gain from a trust that the trustee has reduced by both the CGT discount and the small business 50% active asset reduction. This grossed-up amount is your extra capital gain that you include in your own net capital gain calculation.

If your share of a capital gain from a trust is attributable to a capital gain that the trustee has not reduced by one of these concessions, that amount is your extra capital gain. You include this amount in your own net capital gain calculation.

This calculation lets you reduce your extra capital gains by any current or prior year capital losses that you have, and then apply any relevant discounts to work out your own net capital gain; see example 19.

No double taxation

You are not taxed twice on these extra capital gains because you did not include your capital gains from trusts at item 13 on your tax return (supplementary section).

Example 18: Capital gain greater than share of trust net income and capital gain was discounted

Daniel’s statement of distribution or advice from a Managed Fund shows that his share of the net income of that trust for tax purposes was $7,000.

This is made up of his $3,000 proportionate share of the trust’s non-primary production loss and his $10,000 proportionate share of the trust’s net capital gain to which the trust applied the 50% CGT discount. Daniel also made a $2,000 capital loss during the year on the sale of some shares. He does not have any other trust distributions for the year.

Daniel will need to write a zero at item 13 Partnerships and Trusts on his tax return. He takes $14,000 (that is, the $7,000 remaining of his share of the capital gain from the trust grossed up) into account in working out his net capital gain at item 18. Therefore, after deducting the capital losses from the grossed up capital gain he is taken to have made ($14,000 – $2,000 = $12,000), he applies the 50% CGT discount ($12,000 × 50% = $6,000) and writes $6,000 at A item 18 Capital gains on his tax return (supplementary section). He also writes $14,000 ($7,000 grossed up) at H item 18.

Example 19: Capital gain greater than share of trust net income and capital gain was not discounted

Debra’s statement of distribution or advice from a Managed Fund shows that her share of the net income of that trust for tax purposes was $2,000.

This is made up of her $5,000 proportionate share of the trust’s primary production loss, her $2,000 proportionate share of the trust’s non-primary production income and her $5,000 proportionate share of the trust’s net capital gain. (The trust’s net capital gain does not include any discounted gains.)

At item 13 Partnerships and Trusts on her tax return (supplementary section), Debra will write $5,000 loss from primary production at L and $5,000 non-primary production income at U (that is, $2,000 non-primary production income plus sufficient net capital gain [$3,000] to offset the loss from primary production).

Assuming Debra has no other capital gains or capital losses, she will write $2,000 ($5,000 – $3,000) at H and A item 18 Capital gains on her tax return (supplementary section).

End of example

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