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ETF trust distributions

If you invest in Exchange Traded Funds (ETF) you may receive an end of year Tax Statement from the Fund.

What is an ETF?

An Electronic Traded Fund is an investment fund that you can buy and sell on a securities exchange market (eg. the ASX). In Australia, an ordinary ETF tracks an asset or market index (like the ASX200, for example). It does not usually try to outperform the market. It goes up or down in value in line with the index it tracks. These are passive investments. There are also active ETFs run by fund managers who actively try to outperform the market to achieve specific investment objectives.

You can invest in ETFs that focus investment on Australian shares, international shares, fixed income products, foreign currencies, or precious metals or commodities. The ETF owns the underlying asset, and you purchase units in the ETF.

While EFTs have similarities to traditional Managed Funds, they generally have lower fees.

Like Managed Funds, ETFs may issue end of year Tax Statements containing data that needs to be recorded in your Trust Distributions Table.

Entering Income from ETFs holding Foreign Investments

If your ETF is invested in international shares, it is likely that the information will be limited to foreign source income, foreign income tax offsets, return of capital and net cash distributions.

Enter the NET FOREIGN INCOME from your ETF in Column D of the Trust Distributions Table.

Entering Income from Australian ETFs

The above, at one extreme, may be as complex as tax reconciliation gets, but at the other extreme, an Australian ETF might issue a tax statement like this:

In this case, you would ignore the first section summarising income and focus on Part B, transferring figures to the Trust Distributions Table as follows:

Note: Use the figures in the Attribution Column, not the Cash Distribution Column of your Tax Statement.

  • Enter the total of Amounts listed under “Australian Income” which is $19,407.78 which is made up of $3,606.42 of Australian income (attribution amount) and $15,801.36 (Franked Distributions (Attribution column ($22,870.71 less Franking credits of $7069.35)) in Column A of the Trust Distributions Table (Australian Taxable Income Cash Distributions Net of Tax).
  • Enter the Tax Paid/Offsets on Franked Distributions of $7069.35 (from the centre column) in Column B: Imputed Credits. (These are your franking credits.)
  • If any TFN Credits were noted (in this case $0) these should be entered into Column C.
  • Enter the Net Assessable foreign source income of $447.90 (463.54 less Tax credit of $15.64) in Column D of the Trust Distributions Table. If any amounts were included labelled ‘Other net foreign source income’ and/or ‘Net foreign rent’, these would be included in the figure in Column D.
  • Any amount shown as Net Exempt Income ($0 in the above example) should be entered in Column F.
  • Add the first two figures under Capital Gains (Discounted Capital Gains TAP and Discounted Capital Gain NTAP). Enter the result of $1,567.05 in Column I (Discounted Capital Gains). Note : Mclowd grosses up the capital gain for tax purposes)
  • Enter the total of Capital Gains Other Method (TAP and NTAP) AND Other Capital Gains Distribution in Column J. (Note: In this case, Other Capital Gains Distributions are $1.38, as you are recording figures from the Attribution Column, not Cash distributions.)
  • The amount of $15.64 in the centre column under the heading ‘Foreign Income’ should be entered in Column M (Included Foreign Tax Credits).

Once you have completed the trust distributions screen, please choose SAVE   You will then be taken back to the Year End Process screen. 

Note: The Mclowd Marketplace lists professionals who have the expertise to ensure complex tasks like recording data from Tax Statement in the Trust Distributions Table are completed correctly. You can give them access to your Mclowd account to enter data directly or ask them to prepare a Statement of Advice instructing you how to make the appropriate entries. You can list your requirements and ask for competitive quotes from suppliers, and you can engage with them, communicate, monitor job progress, and finalise payment safely in the Marketplace. It is strongly recommended that Trustees seek professional help with recording Trust Distributions and with other complex Year End tasks to avoid stress and ensure accuracy.