Trust distributions

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 and
• distributions of non-assessable amounts.

Under recent law changes (described below) you will be 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.

Managed Investment Trusts (MIT) have a choice as to whether to apply these changes (see below). If you receive a distribution from a MIT that has not applied these changes, you will be treated as having made a capital gain or gains if the trust’s net income for tax purposes includes a net capital gain and you have been assessed on a share of the MIT’s net income for tax purposes, included in item 13 Partnerships and trusts on your tax return (supplementary section).

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.