| Invesco's guide to your tax statement - June 2010 |
Introduction: Taxation for this financial year
Who should use this guide?
Purpose of this guide
Your tax return and the Invesco tax statement
Australian income
Imputation credits
Foreign-Investment Fund income
Foreign income
Foreign income tax offsets
Capital gains and losses included in your distribution
Capital gains and losses on redemption of your units
Tax return labels for capital gains
Net capital losses
Net capital gains
Return of capital
Capital Gains Tax worksheet
CGT tax return information for the 2010 tax year
Tax File Number (TFN) withholding tax
This guide has been prepared by Invesco to assist you in completing your income tax return for the year ended 30 June 2010. This guide relates only to your investments with Invesco. It is not intended to be, and should not be relied upon as, advice about your personal tax position. Invesco strongly recommends that you consult your accountant or tax adviser about your personal tax circumstances. |
| Introduction: Taxation for this financial year |
Those who disposed of all or part of their investment, or those who have received or are due to receive an income entitlement from an Invesco fund, will need to obtain tax documentation from us to complete any tax obligations.
In line with our strong belief that all fund managers should provide a standard Consolidated Income Tax Statement, we will be presenting our 2009/2010 statements in accordance with the Australian Taxation Office (ATO) 2010 Standard Distribution Statement: Guidance Notes for Fund Managers. The 2010 Standard Distribution Statement is a statement that details the reporting format standard as recommended by the ATO and the Investment & Financial Services Association (IFSA).
Our aim is to significantly reduce the confusion that can arise during tax time.
What should you receive from us?
- If you received income from an Invesco fund, or have an entitlement to income derived in the 2009/2010 financial year, a Consolidated Tax Statement (IFSA format) will be issued.
- If you have sold all or part of a unitholding in a qualifying Invesco fund during the 2009/2010 financial year, a Capital Gains Tax worksheet will be issued to assist in the calculation of capital gains or losses. (Please see page 8 for a list of qualifying funds).
- All investors will receive additional Capital Gains information if the Fund has realised capital gains in the 2009/2010 financial year.
New Zealand clients
For New Zealand clients who require a Taxation Statement for the New Zealand financial year ending 31 March, please call Invesco’s Client and Investment Services Team to obtain this statement. The team can be contacted on 0800 445 529 or +61 3 9611 3600 (Australian Eastern Standard Time) or at info@au.invesco.com.
Contact us
If you have any further queries, please do not hesitate to call our Client and Investment Services Team on (free call) 1800 813 500. Alternatively, you can e-mail us at info@au.invesco.com or keep an eye out for information on our website: www.invesco.com.au.
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Who should use this guide? |
This guide is intended to assist those who have received distributions from an investment in an Invesco fund, in preparing their income tax return for the year ended 30 June 2010 (the 2009/2010 financial year).
The following information assumes that:
1. You are an Australian resident who is an individual taxpayer; and
2. Your investment qualifies as a capital investment for tax purposes.
If you have any doubt about the taxation position of your investment, or if you require any further information about your taxation position, we recommend you consult your accountant or tax adviser.
If you are a trustee of a trust, a company, or a superannuation fund that has investments in an Invesco fund, this guide will not be completely sufficient to complete your tax return. In these circumstances, you should contact your accountant or tax adviser for help in completing your income tax return.
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Purpose of this guide |
This guide will help you complete your 2010 Tax Pack Supplement that accompanies the 2010 Tax Pack.
This guide can be used with your Consolidated Tax Statement, which summarises information from the Invesco fund distribution statements that you will have received during the financial year, ready for inclusion in your income tax return.
The Invesco Consolidated Tax Statement is a record of the income you received from your investment in an Invesco fund(s) relating to the 2009/2010 financial year. It also includes details of your entitlement to any net capital gain from the underlying investment in an Invesco fund.
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Your tax return and the Invesco tax statement |
In your income tax return for the 2009/2010 financial year, you must include income from a trust to which you have a present entitlement, during the period from 1 July 2009 to 30 June 2010. Certain cash distributions that may have been received during the 2009/2010 financial year may have been in relation to the preceding year of income, and certain distributions received after 30 June 2010 may, similarly, relate to the 2009/2010 financial year. Your Consolidated Tax Statement incorporates only that income to which you have a present entitlement for the period from 1 July 2009 to 30 June 2010.
Special rules apply in relation to non-cash distribution tax credits received from investments in an Invesco fund where the fund has received income from either:
- Australian companies that pay franked dividends; or
- Foreign investments on which foreign tax has been withheld.
Expenses that relate to the derivation of income from an investment in an Invesco fund (including interest expenses if you have borrowed to finance your investment) may be deductible. Such expenses can be claimed in your income tax return for the 2009/2010 financial year and, accordingly, can help reduce your net taxable income. These expenses are not shown on your statement, as they relate to your own personal circumstances. If you are unsure about your ability to claim such deductions, we recommend you consult your accountant or tax adviser.
Detailed below is a brief description of amounts that may appear on your Invesco Consolidated Tax Statement along with comments on where each amount should be shown in your income tax return for the 2009/2010 financial year.
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Australian income |
Australian income is simply income received through a fund that is paid on investments situated in Australia. This includes:
- Dividends from investments in Australian shares;
- Trust distributions from investments in other unit trusts;
- Interest from investments in bank deposits or money market securities;
- Rent from direct property holdings; and
- Other income from domestic income-producing investments.
The income that is included here is income investors are entitled to, between the period 1 July 2009 to 30 June 2010, even though you may not receive the cash until after the end of the financial year. A distribution of income includes a cash payment made to you or a re-investment of income back into the Fund. It does not include income investors may have received during this period, but were entitled to in a previous financial year.
If on your Consolidated Tax Statement there is an amount in the column headed ‘Taxable Income’ that is identified as ‘Australian Income’, then this amount must be included in Item 13 at label ‘U’ of your income tax return.
If on your Consolidated Tax Statement there is an amount in the column headed ‘Taxable Income’ that is identified as ‘Australian Franking Credits from New Zealand Companies’, then this amount must be included in Item 20 at label ‘F’ of your income tax return.
It is important to be aware that Australian income does not include capital gains realised on the disposal of Australian investments. Such amounts will be included in the capital gains section of your income tax return (as discussed below).
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Imputation credits |
If an Invesco fund has invested in Australian shares or other unit trusts (which have investments in Australian shares), the fund may receive imputation (franking) credits.
While you as an investor will receive an after-tax cash dividend, the fund will ‘on-distribute’ imputation credits to investors. Accordingly, your Consolidated Tax Statement will show a ‘grossed up’ amount (shown under ‘Taxable Income’), but will be accompanied by a credit representing the tax that has already been paid by the particular company the Invesco fund or other unit trust has invested in.
You will be required to enter the amount of the tax credit at Item 13 label ‘Q’. Once your personal tax liability has been calculated, the amount of the credit will be deducted. (Note that your ability to use these franking credits is subject to your meeting certain criteria, eg. the 45 day holding period test.)
Generally, imputation credits can only be used to offset your tax liability in the year in which they are received. The Australian Tax Office (“ATO”) will refund excess imputation credits to certain taxpayers. That is, if your tax liability for the 2009/2010 financial year is less than the total of the imputation credits you have received, the ATO may refund the excess credits to you. If you are unsure as to your ability to utilise such credits, we recommend you consult your accountant or tax adviser.
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Foreign Investment Fund Income |
Under the Foreign Investment Funds (“FIF”) legislation income may be subject to Australian tax at the time it is earned rather than when it is remitted to Australia. This may result in the Invesco Fund recognizing income for tax purposes at an earlier time than would otherwise be required.
If on your Consolidated Tax Statement there is an amount in the column headed ‘Taxable Income’ that is identified as ‘FIF Income’, then this amount must be included in Item 19 at label ‘C’ of your income tax return.
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Foreign income |
As an Australian resident taxpayer, you are liable to pay Australian income tax on income earned from overseas investments held either directly by you or by a unit trust (such as an Invesco fund) in which you invest.
The amount in the column headed ‘Taxable Income’ on your Consolidated Tax Statement identified as foreign income represents foreign income that has been distributed to you from your investments in an Invesco Fund. This amount includes any foreign income tax offsets you are entitled to and that you must also include as part of your income (see the foreign income tax offsets section below).
The total of your foreign income on your Consolidated Tax Statement should be shown at Item 20 label ‘M’. You will also be required to enter the amount at Item 20 label ‘E’.
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Foreign income tax offsets |
Foreign income tax offsets are the amount of foreign tax paid in the country where the income was earned. As with domestic imputation credits, the income you as an investor receive from the Invesco fund is distributed after the tax is subtracted. However, your Consolidated Tax Statement will show the grossed-up amount.
Foreign income tax offsets you receive may be used to offset the Australian tax liability on the foreign income earned. Special rules apply in determining the amount of foreign income tax offsets that you are eligible to claim. If you are unsure about the amount of foreign income tax offsets that you may use to offset the Australian tax liability on the foreign income earned, we recommend that you consult your accountant or tax adviser.
The amount in the column headed ‘Tax Paid/Offsets’, which relates to foreign income, should be shown as a Foreign Income Tax Offset at Item 20 label ‘O’.
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Capital gains and losses included in your distribution |
A capital gain or loss can arise from the sale of the underlying assets within an Invesco fund (in other words, selling shares). Any net gain within an Invesco fund is distributed to investors and is included in the income distribution. These gains appear on the Consolidated Tax Statement in the column headed ‘Taxable Income’.
From 21 September 1999, certain capital gains made by individuals and trusts may be eligible to be reduced by 50 per cent. These are called discount capital gains. In addition, certain capital gains may be eligible to an indexation of the cost base of a Capital Gains Tax (“CGT”) asset (such as with an investment in shares or a unit trust). However, the indexation was frozen at 30 September 1999.
For an asset that was acquired before 22 September 1999, individuals have a choice between using the:
- CGT discount method; or
- The indexation method (assuming the asset has been held for at least 12 months).
Where appropriate, in relation to the capital gains included in your income distributions from an Invesco fund, Invesco has used a combination of these methods to determine the capital gains liability of the fund. Consequently, there are two types of capital gains noted on your Consolidated Tax Statement. They are as follows:
Other capital gains
These are capital gains that have already been indexed or that have not been held for 12 months or more. The full amount of these capital gains is taxable; and
Discount capital gains
These are capital gains that are eligible for the CGT discount. The full amount has been distributed to you, however only 50 per cent of this amount is taxable.
The taxable amount (i.e. after taking into account the 50 per cent discount) is shown on your Consolidated Tax Statement in the ‘Taxable Income’ column. Your actual CGT liability can only be determined once you have offset any capital losses you may have realised during the period. Refer ‘Net Capital Losses’ section below.
Taxable Australian property capital gains
Discounted, indexation method and other capital gains are further classified as either taxable Australian property (“TAP”) or non taxable Australian property (“NTAP”) capital gains. TAP capital gains are capital gains arising from the sale of underlying assets within the Invesco fund that have the necessary connection with Australia for taxation purposes. If you are an Australian resident this disclosure does not impact the tax treatment of these capital gains. This disclosure is important for non-resident unit holders only.
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Capital gains and losses on redemption of your units |
A capital gain or loss may also arise when you redeem all or part of your unit holding in an Invesco fund (in other words, when you sell units).
As discussed above, from 21 September 1999, certain capital gains (called discount capital gains) made by individuals and trusts may be eligible to be reduced by 50 per cent. Indexation of the cost base of CGT assets (such as with an investment in shares or a unit trust) was frozen at 30 September 1999.
For units that were acquired before 22 September 1999, individuals have a choice between using the:
- CGT discount method; or
- The indexation method (assuming the asset has been held for at least 12 months).
You must also include such gains in the capital gains section of your income tax return (discussed below).
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Tax return labels for capital gains |
You are required to enter your total current year capital gains at Item 18 label ‘H’. For your Invesco investments, these amounts appear on your Consolidated Tax Statement under the column headed ‘Amount’, which represents the sum of your:
- Total capital gains; and
- Any CGT concession amount (under “Tax Deferred/Tax Free Income”).
Any gains made on the disposal of your units in the fund during that income year should be added to these amounts to determine your total current year capital gains in relation to your holdings in Invesco funds.
These particular gains are shown on the Capital Gains Tax Worksheet, which you will receive if you sold all or part of your unit holding in a qualifying Invesco fund during the 2009/2010 financial year.
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Net capital losses |
Net capital losses arise when your total capital losses are greater than your fully taxable capital gains. For your Invesco investments, you may have net losses with respect to the sale of units from an Invesco fund. You may also have net losses that have been carried forward from earlier financial years with respect to other investments you hold.
You are able to use these net losses to offset:
- Capital gains from your Invesco investments; or
- Capital gains from other investments you hold.
Australian tax legislation requires that if a capital loss is to be used to offset a discount capital gain, then it must be offset against the full amount of the discounted capital gain (in other words, before the discount has been applied). The discount is then applied to the balance, if any.
If you have capital losses, you will need to refer to your:
- Consolidated Tax Statement; and
- ATO CGT schedule and the ATO Guide to Capital Gains Tax Booklet, to determine how to correctly apply them.
If you have more capital losses than capital gains (in other words, unapplied capital losses), the balance will represent your capital loss carried forward. This can be carried forward indefinitely until such time as you have a capital gain against which you can offset it.
Any unapplied capital losses from this current year or from previous years should be shown at Item 18 label ‘V’.
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Net capital gains |
You will be required to enter your net capital gains at Item 18 label ‘A’.
Net capital gains are calculated from:
- The capital gains made within the Fund; and
- Any capital gains on disposal of units, after applying any capital losses and/or the discount percentage.
In addition to your Consolidated Tax Statement and Invesco’s Capital Gains Tax Worksheet, you may also need to refer to the ATO Guide to Capital Gains Tax Booklet. As a net CGT liability can be difficult to determine, we recommend you consult an accountant or tax adviser for assistance.
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Return of capital |
A return of capital received in respect of an investment is not taxable. While a return of capital will not be entered into your income tax return as a taxable amount, you should keep a record of any return of capital amount in respect of an Invesco investment, as it will affect your CGT liability upon ultimate disposal of that investment.
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Capital Gains Tax Worksheet |
If you sold all or part of your unit holding in one of the qualifying Invesco funds in the 2009/2010 financial year you will receive a Capital Gains Tax Worksheet. The qualifying Invesco funds are:
- Invesco Australian Share Fund
- Invesco Australian Smaller Companies Fund
- Invesco Diversified Growth Fund
- Invesco Protected Growth Fund
On the Capital Gains Tax Worksheet, there is a Column identified as ‘Indexed/Adjusted Cost’. This is the adjusted cost base of your investment when you acquired your units, taking into account net adjustments for indexation, returns of capital, and other relevant adjustments where applicable.
These adjustment figures (excluding indexation) are recorded on your Consolidated Tax Statements either in the current 2009/2010 financial year and/or previous financial years.
These statements should be retained and readily available as a source of information to compile your current tax return.
We strongly recommend you have your current and any previous Consolidated Tax Statements available to refer to or to provide to your accountant or tax adviser, if you need to seek clarification.
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CGT tax return information for the 2010 tax year |
The ATO requires certain individual taxpayers to complete a CGT schedule. The instructions are provided in the 2010 ATO Guide to Capital Gains Tax Booklet.
Invesco recommends you consult your accountant or tax adviser in completing this schedule.
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Tax File Number (TFN) withholding tax |
When you first invested in an Invesco fund you were asked to provide Invesco with your Tax File Number (TFN). If you chose not to do so, we will have deducted TFN withholding tax at the rate of 46.5% from all distributions of income made to you. If you did not provide the Fund with your TFN, the amount of TFN withholding tax should be shown at Item 13 label ‘R’.
Like other tax credits, TFN withholding tax can be offset against your tax liability on taxable income. In circumstances where the TFN withholding tax exceeds your tax liability, you are entitled to a refund of that excess tax.
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