Background
A Standard Distribution Statement for each year, beginning in 2002, has been developed for managed funds to report tax information to investors.
The statement has been developed as an initiative of the Tax Office and the funds management industry through its main representative body, the Investment and Financial Services Association (IFSA). The aim is to address some of the complexity and confusion experienced by many 'mum and dad' investors when faced with completing their tax return obligations for unit trust distributions. The Australian Shareholders Association and the Australian Independent Retirees Association have also provided valuable input into the design of the standard format.
The standard format is predicated on the usual tax information needs of a resident individual unit-holder in a unit trust operated by the funds management industry.
The Standard Distribution Statement has three parts:
- Part A is designed to directly highlight specific tax return information needed by an investor. For many investors, such as those without capital losses, this information should be sufficient to complete their tax return.
- Part B contains the information required by an investor to determine entitlements to foreign tax credits under Division 18, Part III, of the Income Tax Assessment Act 1936.
- Part C provides details of the components of the distribution. Investors need these details in certain circumstances, such as applying capital losses, and completing the capital gains tax (CGT) schedule, foreign loss quarantining and cost base adjustment information. Part C also allows a reconciliation of the net cash amount distributed to the unit-holder.
The 2002 Standard Distribution Statement was launched with IFSA on 12 March 2002. Guidance notes for fund managers have also been developed to explain the basis of the statement and the rationale for the various items on it.
IFSA strongly recommends the standard approach to its members.
The Tax Office expects that as fund managers adopt the recommended format, investors and practitioners will find it easier to complete the relevant tax return items for unit trust distributions because of the consistency of terms and presentation of trust distribution information.
For illustrative purposes, a sample format of the Standard Distribution Statement is set out for each year, together with the guidance notes.