How managed fund investments are taxed

  • You must declare income you receive from your managed fund in your annual taxation assessment, so it can be taxed at your marginal tax rate.
  • Franked dividends apply only to company income taxed in Australia and are available only to Australian resident investors.
  • You may be entitled to a tax credit for tax paid overseas on your foreign investments.

While managed fund or unit trust income is not taxed, this doesn't mean it is tax free. To help you handle your tax affairs, your managed fund will provide you with all the information you need in your annual statement.

Managed funds do not pay tax, but that doesn't mean they are tax free. This is because the fund leaves it to each investor to manage their own taxation affairs. In this way, managed funds are tax agnostic because you pay tax on this income at your marginal tax rate.

To help you prepare the annual taxation statement that you must lodge with the Australian Taxation Office, your managed fund responsible entity will provide you with a detailed annual account statement. It will include a full listing of all the income and distributions you have received and describe how they apply to you.

Consolidated reporting

When a managed fund's responsible entity issues investors with a consolidated tax report at the end of each financial year, the report will show how much taxable income you, as the investor, need to declare, what your realised capital gains were, and what your unrealised (paper) capital gains were.

If you invested in a large portfolio of direct stocks, some of which were liquidated (sold) throughout the year, you would need to manually calculate the amounts yourself and develop your own consolidated summary for your annual taxation assessment. This can be done by your accountant - for a fee, of course - or if you are investing through a managed account platform it will be able to automatically generate this for you.

Managed funds may also allow you to check their information on the internet and track the performance of your investments as frequently as you wish, just as direct share investors can track their shares through online broking services. If you are invested in multiple markets across multiple asset classes, the ease of tracking performance through a fund manager is even greater.

You don't pay tax just because your investment increase in value

 Managed fund units and unit prices explained
 History of managed funds in Australia