When you are considering an investment, regardless of whether it is one offered by Trilogy, or elsewhere, it is important to realise that there can be tax implications, and those can extend beyond just the returns you make. Knowing your tax, or getting someone to advise you properly when there is complexity involved can be essential. If you are dealing with large amounts, then receiving correct taxation advice can become even more important.

Returns or gains on investments should generally give rise to assessable income or capital gains, either immediately or in the future.  This assessable income or capital gains should be reported or taken into account in your annual income tax return. Australian resident investors are taxed on their worldwide income in Australia, so regardless of whether you acquired, owned and disposed of your investment here or overseas, you should still be taxed on the returns or gains on the investment in Australia.

Non-assessable income – a unique feature

The regular income distributions from a property trust are predominantly comprised of the rental income derived from tenants after deducting losses and outgoings of the property and the trust. For tax purposes, distributions from the trust may include assessable components (e.g. rental income) and non-assessable components. As explained below, the non-assessable component may improve your after-tax returns from an investment.

For investors that hold their investment on capital account, non-assessable distributions from a trust should not be immediately assessable when received but are applied to reduce the tax cost base of each unit in a trust on which the distribution is made. This should impact on the calculation of any capital gain or capital loss made on the ultimate disposal or redemption of the relevant unit. Further, where the non-assessable distribution received on a unit in the trust is greater than the tax cost base of that unit, the tax cost base of the unit is reduced to nil. The amount by which the non-assessable distribution exceeds the tax cost base of the unit should be regarded as a discountable capital gain made by the holder of that unit. Note, the non-assessable distributions referred to above do not include a distribution of the capital gains tax (CGT) concession amount. Such CGT concession amounts should also not be assessable to investors when received, and should not reduce the tax cost base of the unit on which the distribution is made.

While the above general overview of tax considerations for investing in an Australian unit trust may help to point you in the right direction, whether it is tax management for your SMSF or your personal investment portfolio, we recommend you seek the advice of a licensed financial adviser or tax agent to ensure you are making investment decisions that meet your financial goals and your personal obligations with the Australian Taxation Office (ATO). The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. Trilogy does not proport to provide tax advice. We recommend that you consult a licensed Tax accountant if you require financial advice that takes into account your personal circumstances. Trilogy is only licensed to provide general financial product advice on its own products and does not consider your objectives, financial situation or needs when providing any information or advice. You should consider whether the advice is suitable for you and your personal circumstances and we recommend that you seek personal financial product advice on your objectives, financial situation or needs and obtain and read the relevant product disclosure statement before making any investment decision. While every effort is made to provide accurate and complete information, Trilogy Funds Management Limited ACN 080 383 679 AFSL 261425 (Trilogy) does not warrant or represent that the information on this website is free from errors or omissions or is suitable for your intended use. Subject to any terms implied by law and which cannot be excluded, Trilogy accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omissions or misrepresentation in this information. Note: All figures are in Australian dollars unless otherwise indicated.