How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4429
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

If an Australian REIT investment uses distributions (less Australian

Customer Question

If an Australian REIT investment uses distributions (less Australian with holding tax) to buy more units for the investor is capital gains tax applied only when sold, otherwise no need to declare the distributions and no need to declare sale of units if the proceeds do not exceed £11000 (2014/15 tax year)
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

I assume that you have asked this question from an UK taxation perspective. Capital Gains Tax (CGT) only applies on sales. The distribution counts as income and must be declared as such on your annual self assessment income tax return. The Australian with holding tax is allowable as a tax credit against any UK taxation imposed on this income under the Double Taxation Treaty between the UK and Australia.

As the income has been reinvested then the price effectively paid for the additional units increases the total purchase price in calculating the gain when eventually sold. It is always a good idea to report the sale even if the gain is below the Annual Exempt Allowance (11K) for the year. This precludes HMRC pestering in future years for declaration of distributions and capital gain on an asset long disposed of.

If the REIT makes a capital distribution then it is classified as a disposal for CGT purposes, but you have not indicated that this is the case here.

I do hope I have cleared the UK tax position for you in my answer.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Many thanks very helpful and prompt, re your last para the distributions can be sent to my bank or reinvested and I chose the latter, but I will need to go back to the company to find out if they are capital or dividend as it is not clear.


 


can I come back to you next week ?


Michael

Expert:  bigduckontax replied 3 years ago.
Certainly Michael, as an Australian would say, no problems! I see that you have grasped that the fundamental differences between the different types of distribution.

Please be so kind as to rate me before you leave the Just Answer site.
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.
Customer: replied 3 years ago.

I have rated you excellent

Expert:  bigduckontax replied 3 years ago.
Delighted to have been of assistance.
Customer: replied 3 years ago.

It appears that the REIT distribution is complex mixture of dividend interest and capital and they can provide a breakdown for the year. As I understand you the capital element is only taxable on disposal, are the other two elements declared and taxed at separate rates. what are the current rates ?


Michael

Expert:  bigduckontax replied 3 years ago.
The interest element forms part of your income. This is taxed at 20% on total incomes up to GBP 21,365 and 40% thereafter up to GBP 150,000. Above that a 45% tax rate applies. Incomes over 100K have the Personal Allowance successively withdrawn at a rate of a quid every 2 quid earned over the 100K.

Remember any Australian tax suffered on the REIT distribution is allowed as a tax credit against any UK tax liability.

You are correct as to the capital elements.