Managed funds are pooled investment vehicles structured as unit trusts. When a managed fund distributes income to investors, the distribution is not simply a single income item — it is a package of components that reflect the fund’s underlying income for the year. Each component is taxed differently in your hands. Understanding your distribution statement (or AMMA statement) is essential for completing your tax return correctly.
How Managed Funds Distribute Income
A managed fund collects income throughout the year from its portfolio — dividends, interest, rent, and any gains from selling assets. Most funds distribute this income to unit holders once or twice a year. The distribution amount is based on your unit holdings at the distribution date.
Unlike a single-company dividend, a managed fund distribution is a trust distribution that can include:
| Component | Tax treatment |
|---|---|
| Australian dividends (franked) | Assessable + franking credit offset |
| Australian dividends (unfranked) | Assessable income |
| Capital gains — short-term (held <12 months by the fund) | Fully assessable |
| Capital gains — long-term (held ≥12 months by the fund) | 50% CGT discount available to the investor |
| Interest income | Assessable income |
| Foreign income | Assessable + possible foreign income tax offset |
| Tax-deferred amounts | Not currently assessable; reduces cost base |
| Tax-free amounts | Not assessable; reduces cost base |
The Tax Statement — What Your Fund Provides
After 30 June each year, your managed fund will issue a tax statement or AMMA statement (for funds that operate under the Attribution Managed Investment Trust regime). This document is essential for completing your tax return.
The statement shows:
- Your total distribution amount
- A breakdown of each income component (Australian income, foreign income, CGT components, franking credits, etc.)
- Any TFN withholding that was applied (if you did not provide your TFN)
Many funds do not issue their tax statements until August or September, which is why the ATO allows individual tax returns to be lodged until 31 October. If you are waiting on a managed fund tax statement, do not lodge your return until you have it.
Capital Gains Pass-Through
One of the more complex aspects of managed fund tax is the capital gains pass-through. When the fund sells assets within its portfolio, any gains realised are distributed to unit holders. As the investor, you are then entitled to apply the CGT discount to the long-term gain component:
- If the fund held the asset for more than 12 months before selling, the gain qualifies for the 50% CGT discount when attributed to you (as an individual investor)
- If the fund held the asset for less than 12 months, the full gain is assessable without discount
Your tax statement distinguishes between discountable and non-discountable capital gains. You apply the 50% discount to the discountable portion in your own tax return.
Tax-Deferred and Tax-Free Amounts
Some managed fund distributions include amounts that are not immediately taxable:
- Tax-deferred amounts: Arise from building depreciation or other cost allowances inside the fund. They reduce your cost base in the fund — deferring tax until you sell your units.
- Tax-free amounts: Return of capital or other amounts that do not constitute income. They also reduce your cost base, but are not taxable when received.
Both types should be tracked carefully because they affect your capital gain calculation when you eventually sell your units.
Cost Base Management for Managed Funds
Because tax-deferred and tax-free distributions reduce your cost base, you need to track the cost base across the life of your investment — not just the original purchase price.
Example:
- Initial cost base: $10,000
- Year 1 tax-deferred distribution: $200 → cost base reduces to $9,800
- Year 2 tax-deferred distribution: $180 → cost base reduces to $9,620
- You sell units for $15,000: gain = $15,000 − $9,620 = $5,380 (not $5,000)
Keeping a running record of cost base adjustments each year avoids surprises at sale time.
Managed Funds vs ETFs — Tax Difference
Both managed funds and ETFs are typically structured as trusts and issue AMMA statements. The key practical differences:
| Unlisted managed fund | Listed ETF | |
|---|---|---|
| Distributions | Annually or quarterly | Quarterly or semi-annually |
| Tax statement | AMMA statement (Aug–Sep) | AMMA statement (Aug–Sep) |
| CGT on sale of units | At your marginal rate + 50% discount | Same |
| Cost base tracking | More complex — regular subscriptions/redemptions | Simpler if buying/selling on-market |
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Frequently Asked Questions
What happens to my distribution if it has both taxable and tax-deferred components? Only the taxable components (dividends, interest, capital gains) are included in your assessable income. The tax-deferred portion is not taxable now, but it reduces your cost base — meaning you will pay tax on it when you eventually sell your units and realise a larger capital gain.
My managed fund made a loss this year — will I receive a tax loss? No. Losses inside a trust cannot be distributed to unit holders. They remain trapped inside the fund and offset future gains within the fund. Investors cannot access trust losses in their own returns.
Can I claim a deduction for management fees charged by a managed fund? Management fees charged inside the fund (deducted before the distribution is paid) reduce your distribution — they are effectively already accounted for. Separately charged adviser or platform fees may be deductible if they relate to managing your investments. Seek advice from a tax agent.
This article provides general tax information. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register.