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Taxation of unit trusts
Distributions received from unit trusts are subject to tax in the same way that company dividends are. Like shares, the trust, where applicable, will attach imputation credits.
Certain tax implications may arise on the
redemption of your unit trusts.
Unit trusts are subject to the same tax regime as companies.
Just as shareholders are required to pay tax on their dividends, unit holders are required to pay tax on the distribution income they receive through owning unit trusts. However, because the fund has already paid tax, distribution imputation (or tax) credits are issued. This is to ensure that you only pay tax once, preventing the Government from "double dipping".
Distributions are either fully, partially or not imputed. The fund will advise you of the available imputation credits in your end of year tax statement.
The way it works is that you pay the tax on your distribution income, then claim a credit back based on the imputation credit attached to your distribution payment. The effect of the imputation credit will depend on your marginal tax rate.
on a marginal tax rate of less than 33% will receive a tax credit.
Seek good advice
As with all taxation issues, the information is complicated but very important. the Shape of Money recommends that you discuss your personal tax situation with your financial adviser.