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Capital Gain not a capital gain?

Discussion in 'Accounting, Tax & Legal' started by OLI, 10th Oct, 2006.

  1. OLI

    OLI Well-Known Member

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    Hi all,

    I bought some managed funds for $10K and sold them 6 months later for $11K. I didn't keep them longer than 12 months so I assumed it would be a $1K capital gain with no entitlement to the 50% CGT discount.

    However an accountant friend tells me it is 'income' and not a capital gain because I sold it within 12 months. This may be a silly question but can anyone confirm capital gains don't exist within 12 months? I can't get my head around this logic.

    Thanks.
     
  2. MrDarcy

    MrDarcy Well-Known Member

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    It's capital gain, but without the 50% discount it comes to same thing as income, just the numbers go in different places on your tax return.

    Only advantage would be if you had some capital losses outstanding, these could offset the capital gains.

    However, if you were in the business of buying and selling shares, it may then become income, but I don't think so here.
     
  3. OLI

    OLI Well-Known Member

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    Hi MrDarcy,

    That's what I thought. What if the capital gain was in a trust? Income would need to be distributed but my understanding is a capital gain could be used to repay loans from beneficiaries, so there's another advantage.
     
  4. MrDarcy

    MrDarcy Well-Known Member

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    Capital gain in a trust is still capital gains when distributed.
     
  5. OLI

    OLI Well-Known Member

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    So how would this look on paper?

    Income distribution - Does the amount shown in the trust tax return at Item 17 (Net Australian Income) get transferred to Item 12 of the individuals tax return?

    Capital distribution - Does this amount shown at Item 18 (Capital Gains) in the trust tax return get transferred to Item 17 of the individuals return?

    I noticed in the trusts tax return the above two sums are added together to give a Total Net Income in Item 23, with the Capital Gains figure included. Is this Net Income figure ignored for trust INCOME distributions and the capital distributed separatelly as CAPITAL?

    Also, at the end of each financial year the trustee prepares a minute stating the Trust Income Distribution and lists the beneficiaries it is distributing the income to. Does this need to be done for Captial Distributions as well?
     
  6. NickM

    NickM Co-founder Staff Member

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    Oli
    Item 17 trust to Item 12 indiv - yes
    Item 18 trust to item 17 indiv - yes

    Item 23 is total net income, however in the distribution statement the amount of the capital gain is segregated to item F

    NickM
     
  7. OLI

    OLI Well-Known Member

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    Thanks for that Nick, much appreciated.
     
    Last edited by a moderator: 12th Oct, 2006
  8. NickM

    NickM Co-founder Staff Member

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    Item F is located in the distribution block at the end of the tax return