Capital Gains from selling units in managed fund

Discussion in 'Accounting & Tax' started by CheckMate, 27th Sep, 2018.

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  1. CheckMate

    CheckMate Well-Known Member

    Joined:
    4th Dec, 2015
    Posts:
    109
    Location:
    Sydney
    Hi,

    I'm filling a tax return in MyTax2018 website for my wife and trying to figure out how to fill the capital gains section.
    She sold all her units in Magellan Global Fund in March 2017 which she held since 2014. All previous distributions were reinvested in this fund.
    In my understanding I need to calculate capital gains for initial investment and then for each dividend reinvestment and then apply 50% tax discount excluding the final distribution (as less than a year passed since the last one - I don't apply 50% discount for it). Am I correct in my assumptions?
    These are the only capital gains for her in this FY.

    What confuses me is this section in ATO guidelines (Capital gains):
    --------------------------------------------------------------------------------------------------
    Capital gains and managed funds
    How you complete this section will depend on your circumstances:

    If your only capital gains are from a managed fund and, at the Managed funds section, your share of the current year capital gains is $10,000 or less, you do not need to complete the Capital gains or losses section.
    If your only capital gains are from a managed fund and, at the Managed funds section, your share of the current year capital gains is more than $10,000, myTax will prompt you to complete the Capital gains or losses section.
    myTax will complete Total current year capital gains and Net capital gain in the Capital gains or losses section from the information shown in the Managed funds section.
    You will need to complete the Capital gains tax schedule.
    ----------------------------------------------------------------------------------------------

    So does it mean that in our circumstances we don't need to declare Capital Gains from selling the units because the units are from Managed fund, or it is not related to capital gains from selling only related to capital gains made by Managed fund itself?

    Thanks!
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    It means you probably need tax advice. The gains are taxable and are included in the return. A taxpayer with $10K+ of gains must complete a additional schedule. MyTax handles this automatically.

    You may have TWO CGT issues to report :
    - Distributed trust capital gains (from the annual tax statement) which may be discounted, non-discounted or other
    - CGT gain / loss on units disposed adjusted for tax deferred income received in the past.

    Your assumption re discounted gains etc is correct.
     
  3. CheckMate

    CheckMate Well-Known Member

    Joined:
    4th Dec, 2015
    Posts:
    109
    Location:
    Sydney
    Thanks, Paul, it makes sense!

    So the quoted section above from ATO refers to capital gains inside the managed fund, which is reflected in fund's tax statement.
    In addition to this I need to calculate capital gains from selling the units in the fund which is a separate tax event.

    Thanks!
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    I have had it good...Our software allows me to enter the tax statement as it looks (although sometimes they are wrong eg a SMSF will still look like one for a individual) . Its really easy. I know not all tax agent software is like this...Its a complex issue for the DIY taxpayer.

    Important to remember that the trust bit is just one part. All the gains and losses will separately accumulate. eg One trust may pay a gain, another is interest etc...selling the units could even be a loss. Then there are carried forward losses or cap losses and how you apply them.

    Tip : Always allocate CGT or c/fwd losses v's NON-DISCOUNT GAINS first. This can leave a net discount as the net taxable so its halved :) If its a overall loss then thats not a issue and it will carry fwd