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pjay(Enthusiast)Enthusiast
23 Sept 2022

G'day,


I am hoping someone can verify that my approach is correct.


At the end of the income tax year, Units in an AMIT ETF cost bases are adjusted by the AMIT cost base net amount (up if Shortfall, down if excess).


If some Units are sold during the year then the adjustment happens for those Units prior to selling.


This seems to imply that the adjustment is apportioned equally over all the units regardless of time of selling (or purchasing).


My question is if a trust does 2 distributions during the year (dec 31, jun 30), and the Units are sold prior to the first distribution or are sold after the first distribution makes no difference. Likewise if more Units are acquired after the first distribution, they also fully participate in the apportionment.


so the formula is...


Per Unit cost base adjustment = AMIT cost base net amount from AMMA Tax Statement / (Units held at beginning of tax year + Units acquired during the tax year)


Only after doing that the capital gains on the sold Units can be determined.


Or am I missing something.

NOTE for completeness not CGT Event E10 involved. no cost base reduces to zero.


thanks, pjay

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7,497 views
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AriATO(Community Support)Community Support
ATO Certified Response29 Sept 2022

Thanks for waiting @pjay while we looked into this.


Under the AMIT regime, members have ‘clearly defined interest’ to the income and capital of the MIT under the constituent documents of the MIT. For more information on what is ‘clearly defined interest’, go to Law Companion Ruling (LCR 2015/4). LCR 2015/4 sets out the trustee powers/features of trust deed consistent with ‘clearly defined interest’ which includes the power to facilitate daily trust distributions.


Accordingly, you apply the AMIT cost base net adjustment (AMIT CBN adjustment) of $110 across the 50 units even though you sold 10 units post the 31 Dec distribution because amounts might be attributed to you as a member for tax purposes but not actually paid for the 10 units you disposed post the 31 Dec distribution. For more information on AMIT and not- AMIT, go to paragraphs 8-9 of Law Companion Ruling (LCR 2015/11). You adjustment for each unit is $2.20 (110/50). For more information on AMIT Tax Statement , go to AMMA Guidance Notes (QC 67975) and Part C of Personal investors guide to capital gains tax.


If you held 100 units at the start of the tax year and disposed of 50 prior to the 31 Dec record date, you apply the AMIT CBN adjustment across the 100 units you held in that tax year for the reasons stated above.


The AMIT CBN adjustment and AMIT distributions have different tax implications. The AMIT distributions are assessable income and returned them as guided by the AMMA. The AMIT CBN adjustment affect your cost base and when they go negative, the negative amount is returned as capital gain  

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pjay(Enthusiast)Enthusiast
26 Sept 2022

Glad no-one has responded, as I realised what I wrote is quite incorrect. the right question to answer is how to apportion Cost Base Adjustments across multiple distributions. Is pro-rata appropriate?


i.e. At the Dec 31 record date, I have 50 Units and receive a distribution of $100

At June 30 record Date, I have 40 units and receive $120 distribution. The subsequent AMIT Tax Statement includes an AMIT cost base net adjustment of $110.


should that be pro-rata ($220 distributions / $110 = 0.50 per $ of distribution, so $50 to the first distribution, $60 to the second).


Therefore the 10 units disposed of post the first distribution would be adjusted by a $1 each (50 units / $50) covering $10 of the AMIT CBN Adjustment and the 40 held across both distributions by $2.50 ($1 from first distribution and $1.50 from the second).


if I have held 100 units at start of tax year and disposed of 50 prior to Dec 31 record date, there is no adjustment to their cost bases.


This seems to be the only way to work this, because you could have a case where the first distribution was $100, the second $20 but then when the AMIT Tax statement is issued the AMIT CBN Adjustment is $50. i.e. there is no guarantee that the second distribution will exceed the AMIT adjustment, so the adjustment must always be apportioned...pjay

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