How to reset the cost base for Managed Investments/Wraps?

Support Query

How do I reset the cost base for the underlying assets in a Managed Fund?

Overview

There are two ways to action a cost base reset of a Managed Fund's underlying assets.

The appropriate method to use will depend on both of these questions:

1. Do you want Simple Fund 360 to reset the cost base for:
   
   1. The individual underlying assets?; or
   2. The collective Managed Investment as a single unit
      
2. Do you want to reset the cost base for the investment:
   1. Automatically through Simple Fund 360's Cost Base Reset screen; or
   2. Manually by tracking the investment in a spreadsheet and using the Cost Base Reset screen when the underlying asset is disposed at a future date?

This page will cover both methods of applying the cost base reset to a Managed Investment.

This will be especially relevant for funds that record a Managed Investment's performance using the reports provided by an adviser or other external party.

Single Managed Investment account

Prerequisites:

Prior to resetting the cost base for an investment, ensure that the Asset subject to CGT box is ticked.

This can be done by navigating to the investment under Chart of Accounts and clicking to expand the account details:

Reset cost base using the Cost Base Reset screen:

To reset the cost base for the Managed Investment as a collective, navigate to the Cost Base Reset schedule under the Corporate Actions screen.
As the investment has been recorded as a single unit, reset the cost base as you would using the Cost Base Reset screen.

Individual assets

Splitting the Managed Investment into its underlying assets

To split an underlying asset off its Managed Investment, you will need to record two journals:

1.  A disposal of the Managed Investment at cost to record the splitting off of the underlying investment
2. An acquisition of the underlying investments at cost recording their respective units

Both of these journals will use the 94910 Investment Movement Data Clearing account to balance the entries as these cannot be entered as a single journal.

1. Splitting off the underlying asset:

The cost base of the underlying asset will be credited against the Managed Investment's balance.

This can be seen below where we are disposing of the entire Managed Investment's balance of $150,000 at cost and recording the appropriate balancing entry.

Ensure that no capital gains are triggered by this disposal.

2. Acquisition of the underlying assets

This journal will record the underlying assets at cost. For this example, it is assumed that the following underlying investments constitute the Managed Investment. All figures are at cost:

• BHP Shares at $25,000 (BHP.AX)
• Commonwealth Bank of Australia Shares at $110,000 (CBA.AX)
• RIO Tinto Limited Shares at $15,000 (RIO.AX)

The following journal shows how to record this acquisition in Simple Fund 360. Ensure that the relevant CGT dates are entered in the Investment Purchase Details screen.

Please note that the Contract Date will need to be before 9th November 2016 for the asset to appear in the Cost Base Reset schedule.

Once this transaction has been posted, the assets will appear in the Cost Base Reset screen and will be able to be reset as per How to record Transitional CGT Relief (Cost base reset).

Reset cost base manually

If the asset prices are being recorded external to Simple Fund 360 the following steps will be completed to reset their costbases:

1. Set the security price of the asset to the value you wish to reset the cost base to.
   E.g. You have a Managed Investment and you wish to reset its cost-base to $120,000.
   You would edit the Managed Investment's security price to be $120,000 at the date of the CGT reset.
   
2. Process the cost-base reset using the Cost Base Reset screen, selecting the assets you wish to reset the cost-base for.
   

3. Download the CGT Relief Report.

   CGT Relief Report

   The CGT Relief Report will need to be generated and downloaded after the cost base has been reset but before the security price is updated to its actual year end value.

4. After the CGT Relief Report has been downloaded, update the security price to its actual year end market value to ensure that year end create entries uses the correct price.