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CGT Discount and Re-invested Distributions/Dividends

Discussion in 'Accounting, Tax & Legal' started by samaka, 13th Jun, 2008.

  1. samaka

    samaka Well-Known Member

    Joined:
    30th Sep, 2007
    Posts:
    308
    Location:
    Sydney
    Hi all,

    Quick scenario:

    1 Jan 2008 - Buy 100 x XYZ @ $1.00 ($100)

    1 Jul 2008 - Received 10 shares via DRP ($0.10 dividend per share - new shares $1.00)

    31 Jan 2009 - Sell 110 x XYZ @ $1.50 ($150)

    Questions:

    - Is my cost base $100 or $110?

    - Is my capital gain $150 minus the cost base OR $150 minus the $10 dividend (because it's income) then minus the cost base?

    - Do I receive the CGT discount on all the shares or only the 100 I have held for over a year?

    - Is there any difference between managed funds and shares in this respect?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    Parcel 1: 100 shares @ $1 = $100 cost (plus brokerage)
    Parcel 2: 10 shares @ $1 = $10 cost (no brokerage)

    Total cost = $110 (cost base)

    Sell 110 shares @ $1.50 = $165 gross return (minus brokerage)

    Sale of parcel 1: cost $100, sell 100 shares @ $1.5 = $150 ... net gain $50
    Sale of parcel 2: cost $10, sell 10 shares @ $1.5 = $15 ... net gain $5

    Total capital gain = $55 (less after brokerage is included in above calculations).

    Total overall gain = $55 capital gain + $10 income = $65 before tax (this figure is only really useful for your own analysis - not directly relevant to tax)

    Capital gain: $50 * 50% discount = $25, plus $5 with no discount means $30 total capital gain is added to your taxable income, plus the $10 of income from the dividend.

    Remember, these figures need to take brokerage into account - the overall gains will be slightly lower after brokerage.

    Same principal applies for managed funds - but there's no brokerage to calculate (the buy/sell spread is already taken into account by the unit prices you buy/sell at)
     
  3. jrc77

    jrc77 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    147
    Managed funds distribution

    Just remember with distributions from managed funds that this can contain significant parts of "capital gains" as well as dividends from underlying shares. Funds can't hold realised capitals gains within them across financial years, hence have to distribute it to the unit holders. This capital gain may be discounted (if the underlying asset was held for more than 12 months).

    How much capital gain is distributed is dependent on how the fund is managed. Usually a very active fund would have a higher capital gain distribution than a passive fund (buy and hold).

    JR