Part D: Components of a distribution

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Australian income
These details provide a break up of U item 13 Non-primary production income and the information is necessary for those investors who use the Application for refund of franking credits for individuals 2008 (NAT 4098/NAT 4105).

Show the net income for each item. The net income is either:

• the gross income less expenses directly relevant to that income, or
• the gross income less expenses directly relevant to that income and indirect expenses that are apportioned against all income components. Expenses indirectly incurred in respect of deriving the income, for example trust operating expenses can be shown here or separately at the 'Less other allowable trust deductions' item.

The practice of offsetting indirect trust expenses against one type of income (for example, Dividends - franked amount) or successively against income types rather than apportioning the expense against all income components should be discontinued. The 'Less other allowable trust deductions' item uses the same information as the 'Other trust deductions not included elsewhere' field in version 8 of the Annual investment income report. 

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Line 1: Discounted capital gain
If the trust's capital gain has been reduced by the 50% discount show the part of the discounted capital gain that is included in the share of net income of the unit holder.

The $5 amount shown in the 'Tax paid or tax offsets' column is the foreign tax credit amount shown in Part B. 

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Line 2: CGT concession amount
The CGT concession amount is identified as the amounts referred to in subsection 104-71(4) of the Income Tax Assessment Act 1997 (ITAA 1997). Frozen indexation amounts paid to the unit holder should not be shown as CGT concession amounts on the distribution statement.

This amount comprises the non-assessable CGT discount amount paid to the unit holder. Also included is the amount of any capital losses (including unapplied net capital losses carried forward from previous years) applied by the trust (or another trust in the chain) to reduce capital gains made, which is reflected in the payment to the unit holder. (Refer to items 1 and 7 of the table in subsection 104-71(4) of the ITAA 1997.)

Following amendments to sections 104-70 and 104-71 of the ITAA 1997, unit holders are not required to adjust the cost base of their units for these amounts if paid on or after 1 July 2001. 

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Line 3: Capital gains - indexation method
This line item shows the part of the capital gain calculated by the trustee under the indexation method that is included in the share of net income of the unit holder. This item, which is required to allow an investor to make choices about the order in which to deduct capital losses, is taken into account in working out their net capital gain, and is also relevant for CGT schedule preparers.

The $5 amount shown in the 'Tax paid or tax offsets' column is the foreign tax credit amount shown in Part B. 

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Line 4: Capital gains - other method
This line item shows the part of the capital gain included in the share of net income of the unit holder where the trustee has not applied the indexation or discount methods. This item, which is required to allow an investor to make choices about the order in which to deduct capital losses, forms part of the calculation of net capital gain, and is also relevant for CGT schedule preparers.

The $2 amount shown in the 'Tax paid or tax offsets' column is the foreign tax credit amount shown in Part B. 

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Line 5: Distributed capital gains
This item represents the actual cash amount of capital gains distributed and includes the non-assessable CGT concession amount. It is calculated as the sum of lines 1 to 4 of the cash distribution column for capital gains. This figure is not taken into account in working out the unit holder's net capital gain but it allows fund managers to reconcile the net cash distribution amount paid to the unit holder.

The total distributed capital gains (that is, the cash distribution plus the tax paid or tax offsets) equals the total current year capital gains in Part C. 

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Line 6: Net capital gain
This item is the sum of line items 1, 3 and 4 of the 'Taxable amount" column of capital gains and represents the net capital gain under the three methods included in the share of net income of the unit holder. In our example, this is $160, which is transferred directly to A item 18 of the Tax return for individuals (supplementary section) 2008 as discussed in Part A above.

Where the individual unit holder has no current year capital losses or prior year net capital losses, this figure can be used directly for completion of A item 18. If the unit holder has capital losses to offset, investors would need to refer to the Tax Office publications- Guide to capital gains tax 2008 or Personal investors guide to capital gains tax 2008.

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Foreign income
This section is relevant for unit holders applying the foreign loss quarantining provisions under section 160AFD of the ITAA 1936. The classes shown in the statement are those considered relevant for a managed fund. If this is not the case then additional information should be provided. The classes of assessable foreign income and definitions are set out in subsections 160AFD(8) and (9) respectively.

It should be noted that foreign capital gains are not 'assessable foreign income' and should not be shown in this section of Part D but in the capital gains section.

The foreign tax credit amounts are shown only to reconcile the cash and taxable amounts, as foreign tax credit entitlements are determined under Part B. 

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Other non-assessable amounts
The headings used are based on the terminology used in sections 104-70 and 104-71 of the ITAA 1997.

'Tax-exempted amounts' are amounts referred to in subsection 104-71(1). Unit holders are not required to adjust either the cost base or reduced cost base of their units for these amounts.

'Tax-free amounts' are amounts referred to in subsection 104-71(3). Unit holders are required to reduce the reduced cost base of their units by these amounts but not their cost base.

These amounts now only include infrastructure borrowing amounts under section 159GZZZZE and exempt income arising from shares in a pooled development fund under sections 124ZM and 124ZN of the ITAA 1936.

'Tax-deferred amounts' are amounts referred to in subsection 104-70(1) of the ITAA 1997. Unit holders are required to reduce both the cost base and reduced cost base of their units by these amounts. It should be noted that building allowance amounts paid on or after 1 July 2001 are now treated as tax-deferred amounts.

'CGT concession amounts' are shown in the capital gains section to allow reconciliation of capital gains. 

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Other amounts deducted from trust distribution

'TFN amounts withheld'
This item allows the cash amount to be reconciled in Part D.

'Other expenses'
This item allows the cash amount to be reconciled in Part D.

This is to be used for expenses incurred by unit holders, for example management fees, and not deductions allowable to the trustees that are taken into account in the net income calculation under section 95 of the ITAA 1936 and are discussed at paragraph 17 above.

Only the deductible expenses component of this amount should feed through to Part A, Y item 13. 

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'Please retain this statement for income tax purposes'
The use of this wording also exempts the fund manager from the requirement to include the words 'Payment summary' on the distribution statement where TFN amounts have been withheld from the investment. Our position on this and other PAYG withholding payer issues was provided to IFSA on 21 December 2001.