• Bonus units

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    If you have received bonus units on or after 20 September 1985, you may have to pay capital gains tax if you make a capital gain when you dispose of them.

    The capital gains tax rules for bonus units are very similar to those for bonus shares. However, these rules do not apply if the bonus units are issued by a corporate unit trust or a public trading trust.

    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. You need to keep a record of that information to work out your capital gains tax obligation when you dispose of them.

    Flowchart 2 at appendix 4 summarises the rules applying to bonus units issued on or after 20 September 1985.

    Bonus units issued where no amount is included in assessable income

    If you did not include any amount in your assessable income for the issue of bonus units, the acquisition date of the bonus units is the date you acquired the original units to which they relate.

    The table below explains your capital gains tax obligation in these cases.

    Date original shares acquired

    CGT implications of bonus units

    Before 20 September 1985

    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 capital loss you make when you dispose of the bonus units is disregarded. Exception-For bonus units issued on or after 10 December 1986, if you were obliged to pay a further amount for the bonus units, the units are treated as having been acquired at the time the liability for first payment arises. They are subject to capital gains tax. The cost base includes the market value of the bonus units immediately before the liability to pay arises, plus any further amount paid.

    From 20 September 1985

    The cost base is calculated by apportioning the amounts paid for the original units between the original units and the bonus units, resulting in a reduction of the cost base of the original units.

    Example
    Unit trusts

    Sarah is a unit holder in the CPA Unit Trust. She bought 1000 units on 1 September 1985 for $1 each and 1000 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 2000 new units. She did not include any amount in her assessable income as a result.

    The 1000 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 capital gains tax.

    However, the 1000 new units issued for the original units she acquired on 1 July 1996 are subject to capital gains tax. Their cost base is worked out by spreading the cost of the original units ($2000) acquired on that date over both the original units and the bonus units. Each of the units therefore has a cost base of $1.

    Bonus units issued 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 of 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.

    Last modified: 31 Aug 2010QC 16195