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Managed Funds and your Tax | Gotax

June 12, 2024

Know about Managed Funds and your Income Tax return

Investing in managed funds can confuse due to the various types of income and tax implications.

Here's a bit of an overview to assist you in completing your 2024 income tax return.

Types of Income from Managed Funds:

  1. Dividends and Distributions:

    • Dividends: Payments made to you from the fund’s investments in shares.
    • Distributions: Payments made to you from the fund’s income, which can include interest, dividends, rental income, and capital gains.
  2. Capital Gains:

    • Capital Gains Distributions: Distributions from the fund that represent realized capital gains from the sale of investments.
    • Capital Gains from Selling Units: If you sell your units in the managed fund, any profit you make is considered a capital gain.
  3. Interest Income:

    • Income earned from the fund’s investments in interest-bearing assets like bonds or savings accounts.

Tax Credits and Offsets:

  1. Franking Credits:

    • If the managed fund received dividends from Australian companies that have paid tax on those dividends, you may receive franking credits. These credits can reduce your tax liability.
  2. Foreign Income Tax Offset:

    • If the fund received foreign income that was taxed overseas, you might be entitled to a foreign income tax offset to avoid double taxation.
  3. Capital Gains Tax (CGT) Discount:

    • If the capital gain is from an asset held for more than 12 months, you may be eligible for a 50% CGT discount.

Reporting Managed Fund Income:

  1. Annual Tax Statement:

    • Managed funds typically provide an annual tax statement detailing all types of income, capital gains, and tax credits. This statement is crucial for accurately completing your tax return.
  2. Income Labels on Your Tax Return:

    • Label 13U: Unfranked dividends.
    • Label 13C: Franked dividends.
    • Label 13Q: Franking credits.
    • Label 13R: Interest income.
    • Label 18H: Capital gains.
    • Label 20O: Foreign income.
    • Label 20M: Foreign income tax offset.

Or use the simplified version with GotaxManaged Funds and your Income Tax

Steps to Complete Your Tax Return:

  1. Collect Documentation:

    • Ensure you have your annual tax statement from the managed fund, along with any other relevant documents such as transaction statements and records of any additional investments or withdrawals.
  2. Convert Foreign Income:

    • If your managed fund includes foreign income, convert it to Australian dollars using the appropriate exchange rate at the time of receipt.
  3. Enter Income and Credits:

    • Use the labels mentioned above to report the different types of income and any associated tax credits or offsets.
  4. Calculate Capital Gains:

    • If you sold any units, calculate your capital gain or loss. Apply the CGT discount if applicable.
  5. Claim Offsets:

    • Ensure you claim any eligible offsets, such as franking credits and foreign income tax offsets.

Tax Return Example:

Let’s say your managed fund provided you with the following for the 2024 income year:

  • Franked dividends: $900
  • Franking credits: $328
  • Unfranked dividends: $400
  • Interest income: $300
  • Capital gains distribution: $1,400
  • Foreign income: $400 (with $40 foreign tax paid)

Reporting these on your tax return:

  1. Label 13C: Franked dividends: $900
  2. Label 13Q: Franking credits: $328
  3. Label 13U: Unfranked dividends: $400
  4. Label 13R: Interest income: $300
  5. Label 18H: Capital gains: $1,400 (apply CGT discount if held over 12 months)
  6. Label 20O: Foreign income: $400
  7. Label 20M: Foreign income tax offset: $40

These are all clearly labeled in the Gotax online system.

Additional Tips:

  • Keep Records: Maintain detailed records of all transactions related to your managed fund investments.
  • Consult Gotax, the professional Tax Agents if you’re unsure about any aspect of your tax return. 

With Gotax and by following these steps and ensuring you accurately report your managed fund income and claim all eligible credits and offsets, you can complete your 2024 income tax return confidently.

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