Explains how distributions from trusts (including managed funds) can affect your CGT position.
Distributions from a trust
Distributions from a trust include managed funds, which are 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
- distributions of non-assessable amounts.
You are 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.
In June 2011, amendments were enacted that enable the streaming of capital gains and franked dividends to beneficiaries, subject to relevant integrity provisions. For managed investment trusts (MITs) which have not previously made an election to apply the amendments, the amendments start to apply from 2017–18. For MITs which have previously made an election to apply the amendments, the amendments continue to apply in 2017–18 and later income years.
These amendments do not apply to MITs that are attribution managed investment trusts (AMITs). They are subject to the separate attribution rules that enable capital gains and franked distributions to be attributed to members for tax purposes.
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.
Attribution managed investment trusts
An eligible MIT may choose to apply the attribution rules in Division 276 of the Income Tax Assessment Act 1997. Where that choice is made, the MIT becomes known as an attribution managed investment trust (AMIT).
Generally, those rules apply to 'attribute' amounts to each member based on their interest in the AMIT, rather than a 'present entitlement' to the net income of the trust or the amount actually paid.
The attribution rules ensure that amounts from the trust retain their tax character as they flow through to you. This is so that for taxation purposes it is treated as if you had earned the income directly in your own right. In relation to capital gains, those rules mean you will treat the capital gains component of your trust income as your own capital gain.
These rules also mean that the cost base of your units in an AMIT may have annual upward or downward adjustments.
Your share of trust amounts attributed to you is shown on your member statement, which for an AMIT is called an AMIT member annual statement (AMMA) (similar to the standard distribution statement provided by a managed fund).
Otherwise, for members (unit holders) of an AMIT, there will be little discernible difference to the way income is distributed to you.
For more information, see Cost base adjustments for AMIT members.
Corporate Collective Investment Vehicles
From 1 July 2022, a new form of collective investment vehicle is available for funds management activities – a corporate collective investment vehicle (CCIV).
From a regulatory perspective, a CCIV is a registered company that comprises one or more 'sub-funds' and is operated by a single corporate director. A sub-fund of a CCIV is all or part of the CCIV's business that is registered as a sub-fund of the CCIV by ASIC. However, the tax framework treats each CCIV sub-fund as a separate fixed unit trust. A CCIV sub-fund is subject to the existing rules for the taxation of trusts.
A CCIV sub-fund trust is taxed as an AMIT for an income year under the attribution regime in Division 276 of the Income Tax Assessment Act 1997 if it meets certain AMIT eligibility criteria. We call this an ‘attribution CCIV sub-fund trust’.
An attribution CCIV sub-fund trust, as a deemed AMIT, is required to provide an AMMA statement to each of its members. If a CCIV sub-fund trust does not meet the requirements to be an AMIT, it will be taxed under Division 6 of the Income Tax Assessment Act 1936 and will provide distribution information to beneficiaries through a standard distribution statement (SDS).
Capital gains made by a trust
The general trust taxation provisions in Division 6 of the Income Tax Assessment Act 1936 (Division 6) give way to specific rules in Division 115-C of the Income Tax Assessment Act 1997. These rules ensure that, where permitted by the trust deed, the capital gains of a trust (other than an AMIT) can be effectively streamed to beneficiaries for tax purposes by making them 'specifically entitled' to those gains. Generally, a beneficiary will be considered specifically entitled to an amount of a capital gain if the beneficiary has received (or can reasonably be expected to receive) an amount referrable to that gain, and certain recording conditions are satisfied.
A beneficiary specifically entitled to a capital gain will generally be assessed in respect of that gain, regardless of whether the benefit they receive or are expected to receive is income or capital of the trust.
Capital gains to which no beneficiary is specifically entitled will be allocated proportionately to beneficiaries based on their present entitlement to income of the trust estate (excluding amounts of capital gains and franked distributions to which any entity is specifically entitled). This proportion is known as the beneficiary's 'adjusted Division 6 percentage'. If there is some income to which no beneficiary is entitled (apart from capital gains and/or franked distributions to which any entity is specifically entitled) the trustee may be assessed under section 99 or 99A of the ITAA 1936.
The trust provisions also allow the trustee of a resident trust to choose to be assessed on a capital gain, provided no beneficiary has received or benefited from any amount relating to the gain during 2022–23 or within 2 months of 30 June 2023.
Question 13 in the supplementary tax return for individuals
Question 13 in the Tax return for individuals (supplementary section) 2023 tells you to exclude net capital gains from the amount of trust income you write at question 13 – label U in your supplementary tax return. In your statement of distribution or advice, the trust should state your share of the trust’s net capital gain. Exclude only so much of the trust's net capital gain that would otherwise form part of your share of the trust income.
For beneficiaries of trusts
Determine your share of the capital gain of the trust
You will need to determine whether you have a share of each capital gain made by the trust that has been included in the trust's net income for tax purposes. For every capital gain you have a share of, your statement of distribution or advice from the trust should advise you of:
- your share of that gain
- how much of the net income of the trust for tax purposes relates to each gain (or what is the 'attributable gain' to which your share relates)
- the type of capital gain to which your share relates and the method used by the trustee to calculate it (including any CGT discount or small business concessions applied)
- your share of any credit for a foreign resident capital gains withholding amount.
Your share of a capital gain is any amount of the capital gain to which you are specifically entitled plus your adjusted Division 6 percentage share of any amount of the capital gain to which no beneficiary is specifically entitled.
These rules do not apply to a distribution of a capital gain by an AMIT.
For more information, see Managed investment trusts.
Divide by the total capital gain
That amount is then divided by the total capital gain to give you your ‘fraction’ of the total capital gain.
Multiply your fraction of the capital gain by the trust's taxable income relating to the capital gain
Your fraction is then multiplied by the net income for tax purposes of the trust that relates to the capital gain. The result is your ‘attributable gain’.
In certain circumstances where the trust's net capital gain and total net franked distributions exceed the net income of the trust for tax purposes, the amount of the trust's taxable income relating to the capital gain is rateably reduced. This ensures that beneficiaries and the trustee cannot be assessed on more than the total net income of the trust.
Extra capital gains you are taken to have made
If you are a beneficiary who is taken to have an 'attributable gain' (your share of a trust’s capital gain included in its net income for tax purposes), 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 2022–23. You include them at step 2 in Part B or Part C.
In order to work out the amount of extra capital gains that are taken into account in working out your own net capital gain, you will need to know the method used by the trustee in calculating the trust’s capital gains that were included in the trust’s net capital gain. Your statement of distribution or advice should show this information.
If you are a unit holder in a managed fund, the trustee or manager will generally advise you of your share of the trust’s net capital gain, together with details of your share of any other income distributed to you.
In other cases, the trustee may have advised you what your share is or you may need to contact them to obtain details.
Trust distributions to which the CGT discount or the small business 50% active asset reduction apply
Your 'attributable gain' is then grossed-up as appropriate for any CGT concessions (the general CGT discount or the small business 50% reduction) applied by the trustee to that capital gain. You have an extra capital gain equal to the grossed-up amount.
Where the trustee reduced the capital gain by the CGT discount or the small business 50% active asset reduction, you need to gross up your 'attributable gain' by multiplying it by 2. This grossed-up amount is an extra capital gain.
You multiply by 4 your attributable gain that the trust has reduced by both the CGT discount and the small business 50% active asset reduction. This grossed-up amount is an extra capital gain.
If the capital gain has not been reduced by either the CGT discount or the small business 50% active asset reduction, then your 'attributable gain' is an extra capital gain.
You are then able to 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.
No double taxation
You are not taxed twice on these extra capital gains because you did not include your capital gains from trusts at question 13 in your supplementary tax return.
Example 16: Applying the trust provisions
Step 1: Determine the beneficiary’s share of the capital gain of the trust
The Cropper Trust generated $100 of rent and a $500 capital gain (which was a discount capital gain). The trust also had a capital loss of $100. The trust deed does not define ‘income’ and therefore capital gains do not form part of the trust income. As a result, the income of the trust estate is $100 (being an amount equal to the rent), whereas the net income of the trust for tax purposes is $300. The $300 net income for tax purposes comprises the $200 net capital gain (which is the $500 capital gain less the $100 capital loss, reduced by the 50% CGT discount) plus the $100 rent income.
The trustee resolves to distribute $200 related to the capital gain (after absorbing the capital loss) to Shane and the $100 of rent to Andrea.
Shane is specifically entitled to 50% of the $500 capital gain because he can reasonably be expected to receive the economic benefit of 50% of the $400 capital gain remaining ($200) after accounting for the $100 capital loss. Shane’s share of the capital gain equals the amount to which he is specifically entitled namely $250 (50% of the $500 capital gain).
Andrea’s share of the capital gain is also $250 because, being entitled to all of the $100 income of the trust (none of the capital gain being treated as trust income), she has an adjusted Division 6 percentage of 100% and there is $250 of the $500 capital gain to which no one is specifically entitled.
Step 2: Divide by the total capital gain
Shane divides his share of the capital gain ($250) by the total capital gain ($500) and therefore has a fraction share of one-half of the capital gain.
Andrea divides her share of the capital gain ($250) by the total capital gain ($500) and therefore also has a fraction share of one-half of the capital gain.
Step 3: Multiply the beneficiary’s fraction of the capital gain by the trust’s taxable income relating to the capital gain
The net income of the trust for tax purposes relating to the capital gain is $200.
Shane’s attributable gain is $100 ($200 × one-half).
Andrea’s attributable gain is $100 ($200 × one-half).
Step 4: Gross up the amount for CGT discounts applied by the trustee
Shane is required to double his attributable gain of $100 to an extra capital gain of $200 because the trustee had applied the 50% CGT discount.
Andrea similarly doubles her attributable gain to $200 which is her extra capital gain.
Both Shane and Andrea will take their extra capital gain of $200 into account in working out their own net capital gain at question 18. Shane and Andrea are individuals entitled to claim the 50% CGT discount. Neither have other capital gains or capital losses of their own to apply against their extra capital gains. Therefore, after applying the 50% CGT discount to their $200 extra capital gain, they will have made a net capital gain of $100 ($200 extra capital gain × 50% = $100). They will write $100 at question 18 Capital gains – label A in their supplementary tax returns. They also write $200 (which is $100 grossed-up) at question 18 – label H.
Note that Shane and Andrea's statement of distribution or advice from the trust advised each of them that the trust had made a capital gain of $500, that only $200 of this had been included in the net income of the trust estate for tax purposes, that the 50% discount had been applied and that their share of the gain was $250. Alternatively, it could have advised them that they each had an extra capital gain of $200 that was a discount capital gain.
End of exampleApplying the concessions
You must use the same method as the trust to calculate your capital gain.
This means you cannot apply the CGT discount to capital gains distributed to you from the trust which was calculated using the indexation method or 'other' method.
You can only apply the small business 50% active asset reduction to grossed-up capital gains to which the trust applied that concession.
Example 17: Distribution where the trust claimed concessions
Serge is the sole beneficiary in the Shadows Unit Trust. His statement of distribution or advice from the trust shows that his 100% share of the net income of the Shadows Unit Trust for income tax purposes was $2,000. The $2,000 includes a net capital gain of $250 (made of a $1,000 capital gain that was reduced by the CGT discount and the small business 50% active asset reduction).
His statement advises him that he has a 100% share of the capital gain which is $1,000.
Because he has a 100% share of the capital gain, Serge will have an 'attributable gain' of $250 (that is, the whole of the net income of the trust estate for tax purposes that relates to the gain).
Due to the application of the CGT discount and the small business 50% active asset reduction, Serge then grosses up his 'attributable gain' of $250 by multiplying it by 4 to $1,000 which is his extra capital gain.
Serge has also made a capital loss of $100 from the sale of shares.
He calculates his own net capital gain as follows:
Serge’s extra capital gain (that is, his $250 attributable gain × 4) |
$1,000 |
Deduct capital losses |
$100 |
Capital gains before applying discounts |
$900 |
Apply the CGT discount of 50% |
$450 |
Apply the 50% active asset reduction |
$225 |
Net capital gain |
$225 |
Serge will write $1,000 at question 18 – label H in his supplementary tax return, which is his total current year capital gain. The net capital gain he will write at question 18 – label A in his supplementary tax return is $225. He will write a trust distribution of $1,750 ($2,000 − $250) at question 13 – label U in his supplementary tax return.
End of exampleInvestors in managed funds
If you are a unit holder in a managed fund and have received a distribution from a trust that includes a net capital gain, 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 distribution from the trust; see examples 18 and 19.
Your statement of distribution or advice should show your share of the trust net capital gain and other information relevant to that gain, including your share of any credit for a foreign resident capital gains withholding amount.
If your statement shows that your share of the trust’s net capital gain is more than the overall net amount of your distribution, then there is a limit on the amount of the capital gain component you exclude from question 13 Partnerships and trusts – label L in your supplementary tax return. In this situation, you cannot exclude an amount greater than the overall net amount of your distribution from the trust; see examples 18 and 19. The amount of your share of the trust’s net capital gain you exclude from the amount at question 13 Partnerships and trusts – label L 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
Your statement should show 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 2022–23. 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 2. This grossed-up amount is your extra capital gain that you include in your own net capital gain calculation.
You multiply by 4 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 question 13 in your supplementary tax return.
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 (other than an AMIT) 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 writes zero at question 13 Partnerships and Trusts in his supplementary 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 question 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)
- he writes $6,000 at question 18 Capital gains – label A in his supplementary tax return
- he writes $14,000 ($7,000 grossed-up) at question 18 – label H.
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 (other than an AMIT) 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 question 13 Partnerships and Trusts in her supplementary tax return, Debra will write $5,000 loss from primary production at label L and $5,000 non-primary production income at label 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 question 18 Capital gains – label H and A in her supplementary tax return.
End of exampleNon-assessable payments from a trust
Trusts often make non-assessable payments to beneficiaries.
If a profit made by the trust is not assessable, any part of that profit distributed to a beneficiary will also be non-assessable in most cases, for example, a share of a profit made on the sale of property acquired by the trust before 20 September 1985.
However, if you receive non-assessable payments from a trust, you may need to make cost base adjustments to your units or trust interest. Those adjustments will affect the amount of any capital gain or capital loss you make on the unit or interest, for example, when you sell it.
Non-assessable payments may be made over a number of years. If non-assessable payments exceed your cost base, you may also make a capital gain equal to the excess in the year the excess is paid to you.
Non-assessable payments from a managed fund to a unit holder are common and may be shown on your statement from the fund as:
- tax-free amounts
- CGT-concession amounts
- tax-exempted amounts
- tax-deferred amounts.
If you are a beneficiary in a trust which is subject to the trust provisions relating to 'streaming' of capital gains and franked distributions, even if you are distributed an amount that is described as the CGT concession amount, you may be taken to have made a capital gain. You will need to include this in your own net capital gain calculation.
You may need to adjust the cost base and reduced cost base of your units depending on the kind of non-assessable payment you received. If you hold an interest in an AMIT, the adjustment may either increase or decrease your cost base and reduced cost base. For more information, see Cost-base adjustments for AMIT members.
Your statement of distribution or advice should show amounts and other information relevant to your cost base or reduced cost base.
Tax-free amounts relate to certain tax concessions received by the fund which enable it to pay greater distributions to its unit holders. If your statement shows any tax-free amounts, you adjust the reduced cost base (but not your cost base) of your units by these amounts. Payments of amounts associated with building allowances which were made before 1 July 2001 were treated as tax-free amounts.
CGT-concession amounts relate to the CGT discount component of any actual distribution. Such amounts do not affect your cost base and reduced cost base if they were received after 30 June 2001. A CGT-concession amount received before 1 July 2001 is taken off the cost base and reduced cost base.
Tax-exempted amounts are generally made up of:
- exempt income of the fund
- amounts on which the fund has already paid tax, or
- income you had to repay to the fund.
Such amounts do not affect your cost base and reduced cost base.
Tax-deferred amounts are other non-assessable amounts, including indexation received by the fund on its capital gains and accounting differences in income. You adjust the cost base and reduced cost base of your units by these amounts. Payments associated with building allowances which are made on or after 1 July 2001 are treated as tax-deferred amounts.
If the tax-deferred amount is greater than the cost base of your units, you include the excess as a capital gain. You can use the indexation method if you bought your units before 11:45 am AEST on 21 September 1999.
Capital loss
You cannot make a capital loss from a non-assessable payment.
As a result of recent stapling arrangements, some investors in managed funds have received units which have a very low cost base. The payment of certain non-assessable amounts in excess of the cost base of the units will result in these investors making a capital gain.
Non-assessable payments under a demerger
If you receive a non-assessable payment under an eligible demerger, you do not deduct the payment from the cost base and the reduced cost base of your units or trust interest. Instead, you adjust your cost base and reduced cost base according to the demerger rules.
You may make a capital gain on the non-assessable payment if it exceeds the cost base of your original unit or trust interest, although you will be able to choose a CGT rollover.
An eligible demerger is one that happens on or after 1 July 2002 and satisfies certain tests. The trust making the non-assessable payment will normally advise unit or trust interest holders if this is the case.
For more information, see Investments in shares and units.
Cost base adjustments
Generally, you make any adjustment to the cost base and reduced cost base of your unit or trust interest at the end of the income year. However, if some other CGT event happens to the unit or trust interest during the year (for example, you sell your units), you must adjust the cost base and reduced cost base just before the time of that CGT event. The amount of the adjustment is based on the amount of non-assessable payments paid to you up to the date of sale. You use the adjusted cost base and reduced cost base to work out your capital gain or capital loss.
The cost base and reduced cost base adjustments are more complex if you deducted capital losses from a grossed-up capital gain where a capital gain made by the trust was reduced by the small business 50% active asset reduction. If this applies to you, you may need to seek advice from us on how to make the adjustments.
If the tax-deferred amount is greater than the cost base of your unit or trust interest, you include the excess as a capital gain. You can use the indexation method if you bought your units or trust interest before 11:45 am AEST on 21 September 1999. However, if you do so, you cannot use the discount method to work out your capital gain when you later sell the units or trust interest.
Example 20: Bob has received a non-assessable amount
Bob owns units in OZ Investments Fund (a managed fund that is not an AMIT and has not elected to apply the 2011 changes to the rules relating to capital gains made by trusts) which distributed income to him for the 2022–23 income year. The fund gave him a statement showing his distribution meant that his share of the trust’s net capital gain included:
- $100 calculated using the discount method (grossed-up amount $200)
- $75 calculated using the indexation method
- $28 calculated using the 'other' method.
These capital gains add up to $203.
The statement shows Bob’s distribution did not include a tax-free amount, but it did include a $105 tax-deferred amount.
From his records, Bob knows that the cost base and reduced cost base of his units are $1,200 and $1,050 respectively.
Bob has no other capital gains or capital losses for the 2022–23 income year and no unapplied net capital losses from earlier years.
The following steps show how Bob works out the amounts to write on his tax return.
Step 1
As Bob has a share of a capital gain which the fund reduced using the CGT discount of 50% (so that his share was $100), he includes the grossed-up amount of his share ($200) in his total current year capital gains.
Step 2
Bob adds the grossed-up amount to his share of the trust’s capital gains calculated using the indexation method and 'other' method to work out his total current year capital gains:
$200 + $75 + $28 = $303
Step 3
As Bob has no other capital gains or capital losses, and he must use the discount method for the capital gains calculated using the discount method from the trust, his net capital gain is equal to his share of the trust’s net capital gain for tax purposes ($203).
Step 4
Bob completes question 18 in his supplementary tax return as follows:
Bob must print X in the No box at label M and leave the code blank because he did not apply an exemption or rollover.
Records Bob needs to keep
The tax-deferred amount Bob received is not included in his income or his capital gains, but it affects the cost base and reduced cost base of his units in OZ Investments Fund for future income years.
Cost base |
$1,200 |
less tax-deferred amount |
$105 |
New cost base |
$1,095 |
Reduced cost base |
$1,050 |
less tax-deferred amount |
$105 |
New reduced cost base |
$945 |
End of example
Example 21: Ilena’s capital loss is greater than her non-discounted capital gain
Ilena invested in XYZ Managed Fund (a managed fund that is not an AMIT and has not elected to apply the 2011 changes to the rules relating to capital gains made by trusts). The fund made a distribution to Ilena for the year ending 30 June 2023 and gave her a statement that shows her distribution meant that her share of the trust’s net capital gain included:
- $65 discounted capital gain
- $90 non-discounted capital gain.
The statement shows Ilena’s distribution also included:
- $30 tax-deferred amount
- $35 tax-free amount.
Ilena has no other capital gains, but made a capital loss of $100 on some shares she sold during the year. Ilena has no unapplied net capital losses from earlier years.
From her records, Ilena knows the cost base and reduced cost base of her units are $5,000 and $4,700 respectively.
Ilena has to treat the capital gain component of her share of the fund’s net income for tax purposes as if she made the capital gain. To complete her tax return, Ilena must identify this capital gain component and work out her net capital gain.
The following steps show how Ilena works out the amount to write at question 18 – label H in her supplementary tax return.
Step 1
As Ilena has a share of a capital gain which the fund reduced by the CGT discount of 50% (her discounted share being $65), she must gross up her share of this capital gain. She does this by multiplying the amount of her share of the discounted capital gain by 2:
$65 × 2 = $130
Step 2
Ilena adds her share of the trust’s grossed-up and non-discounted capital gains to work out her total current year capital gains:
$130 + $90 = $220
She writes her total current year capital gains ($220) at question 18 – label H in her supplementary tax return.
Step 3
After Ilena has grossed-up her share of the fund’s discounted capital gain, she subtracts her capital losses from her capital gains.
Ilena can choose which capital gains she subtracts the capital losses from first. In her case, she gets the better result if she:
- subtracts as much as possible of her capital losses (which were $100) from her non-discounted capital gains ($90).
$90 − $90 = $0 (non-discounted capital gains) - subtracts her remaining capital losses after step 1 ($10) from her discounted capital gains ($130).
$130 − $10 = $120 (discounted capital gains) - applies the CGT discount to her remaining discounted capital gains:
($120 × 50%) = $60 (discounted capital gains)
Step 4
Finally, Ilena adds up the capital gains remaining to arrive at her net capital gain:
$0 (non-discounted) + $60 (discounted) = $60 net capital gain.
Ilena completes question 18 in her supplementary tax return as follows:
Ilena must print X in the No box at label M and leave the code blank. The trust applied the exemption or rollover and will need to report that on its trust return.
Records Ilena needs to keep
The tax-deferred and tax-free amounts Ilena received are not included in her income or her capital gain, but the tax-deferred amount affects the cost base and reduced cost base of her units in XYZ Managed Fund for future income years. The tax-free amount affects her reduced cost base.
Ilena reduces the cost base and reduced cost base of her units as follows:
Cost base |
$5,000 |
less tax-deferred amount |
$30 |
New cost base |
$4,970 |
Reduced cost base |
$4,700 |
less (tax-deferred amount + tax-free amount) |
$65 |
New reduced cost base |
$4,635 |
End of example
Cost base adjustments for AMIT members
If any non-assessable amounts from an AMIT are attributed to you, these may affect the cost base of your units in the AMIT.
Non-assessable payments are any part of the profit of the trust that is non-assessable and are not included in your assessable income. Tax-free and tax-deferred amounts may reduce the cost base of your units, while tax-exempt amounts do not affect the cost base; see Trust non-assessable payments (CGT event E4).
Under the new tax system for managed investment trusts, the cost base of your units can be adjusted both upwards and downwards (upwards adjustments were not previously allowed).
Your statement of distribution or advice or AMIT Member Annual statement (AMMA) should show amounts and other information relevant to your cost base or reduced cost base.
The AMIT will calculate a cost base net amount. The cost base net amount is the balance of your cost base reduction amount and your cost base increase amount.
Example 21A: AMIT cost base net adjustment
Miriam owns units in the Exponential Growth Fund, which has elected into the new tax system for managed investment trusts in 2022–23 and is therefore an AMIT.
The fund attributes $13 per unit to Miriam for 2022–23 but pays a cash amount of $3 per unit. The balance of $10 is retained by Exponential Growth Fund for reinvestment, rather than paid as a cash distribution. Miriam includes the $13 attributed amount in her assessable income as 'Share of net income from trusts' at question 13 Partnerships and trusts.
Cost base consequences
The $13 attributed to Miriam is added to her cost base of $55, while the actual payment of $3 is taken away from her cost base. In this way, the cost base increase is netted off against the cost base reduction, resulting in a cost base net increase of $10 per unit. The cost base increase and cost base reduction are shown in Miriam's AMMA statement, along with a cost base net amount of $10.
The $10 cost base net amount is not included in Miriam's assessable income or capital gains because it represents amounts that have already been taxed to her on attribution, but is used to increase the cost base of her units in Exponential Growth Fund for future years. Miriam will need to include it in her cost base calculations when she eventually sells her units in the fund, to ensure that the undistributed amount attributed to her is not double taxed as a capital gain.
Cost base per unit |
$55 |
plus taxable income attributed in 2022–23 |
$13 |
less cash dividend for 2022–23 |
$3 |
New cost base per unit |
$65 |
End of example
The amounts attributed to you to be included in your assessable income, as well as any non-assessable non-exempt income related to your CGT asset, are added to the cost base amount of your units in the AMIT. Cash payments you receive in relation to your units are taken away from their cost base. Any reductions and increases are netted off against each other to arrive at your cost base net amount.
Any excess cost base net amount is used to reduce your unit’s cost base. If the excess is greater than your cost base it will reduce your cost base to nil. Any remaining excess will result in a capital gain. If the excess is less than your cost base your cost base amount will be decreased, which may result in a greater capital gain or reduced capital loss on the disposal of your membership interests in the AMIT.
Any shortfall in the cost base net amount is used to increase your asset’s cost base and reduced cost base. This may result in a reduced capital gain or increased capital loss on disposal of your assets.
For more information, see LCR 2015/11 Attribution Managed Investment Trusts: annual cost base adjustments for units in an AMIT and associated transitional rules.
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