Support Query
The SMSF received a tax deferred distribution for a Unit Trust that exceeds the cost base of the investment. The excess amount of tax deferred is to be treated as a capital gain. How do I record this entry in SF360?
Solution
Example:
Current cost base of Unit Trust: $325,000
Distribution received: $500,000 ($18,321 Other Income; $81,162 as Discounted Capital Gain and $400,517 Tax Deferred).
Tax Deferred exceeding cost base to be treated as capital gain ($400,517-$325,000) equates to $75,517.
This process is broken down into two steps:
Step 1: Record the Distribution and tax components received
| From the Main Toolbar, go to Accounting. |
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| Select Transaction list |
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- From the Transaction List screen, select New Transaction. From the drop down list, select Bank Statement.
- Input the date of the transaction and a reference number (SF360 will automatically produce a reference number, but it is editable). You can include a description of the transaction in the Description box.
- Under the Account heading, select the bank account from the Input Bank Account box. Next, begin typing and select account 23800/INVESTCODE from the Input Account Box.
- Input the distribution amount received of $500,000 in the CR field. SF360 will post a corresponding entry to the bank account fields on the screen.
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Input the distribution statement tax information in the Distribution/Interest Details section below.
After you have entered all information for the transaction, select Post. Next complete step 2.
Step 2: Record a journal to dispose of the investment to recognise the capital gain and to re-purchase the units at $0.
| From the Main Toolbar, go to Accounting. |
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| Select Transaction list |
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- From the Transaction List screen, select New Transaction. From the drop down list, select Journal.
- Input the Date, Reference and Description.
- In the first line item, select 78200/INVESTCODE.
- Input the number of units to be disposed of in the Units column (10 in this example) and a zero in the Credit column.
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When recording the disposal, the More Details panel will display the capital gain of $75,517, the tax deferred component which exceeded the cost base of the investment (for investments held longer than 12 months the indexation or discount method will appear).
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In the second line item, select 78200/INVESTCODE.
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Input the number of units to re-purchase (10 in this example) and a zero in the Debit column.
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The More Details panel will appear. In the More Details panel ensure the contract date of the purchase is backdated to the original purchase of the units (prior to this CGT event occurring).
- Select Post.