Income tax: capital gains: how is the adjusted payment calculated pursuant to subsection 160ZM(3A) of the Income Tax Assessment Act 1936 where there is a non-assessable distribution from a unit trust and when is the adjusted payment used for the purposes of calculating a capital gain or loss under section 160ZM?

The general position covering the capital gains consequences of non-assessable distributions as they affect the calculation of the cost base of an asset is set out in TD 93/D131. Specific provisions relating to the impact of certain non-assessable distributions (i.e. distributions attributable to deductions for capital expenditure on travel accommodation and on certain buildings and structural improvements; distributions from income that are exempt income because of section 124ZM or 124ZN; distributions from the consideration in respect of a disposal of shares in a PDF; and distributions from an amount that, because of section 159GZZZZE, is not included in assessable income) are included in subsection 160ZM(3A).

The effect of subsection 160ZM(3A) is to exclude certain amounts from the calculation of the indexed cost base as required under paragraph 160ZM(2)(a) and subsection 160ZM(3) where non-assessable distributions are received. Non-assessable distributions generally reduce the indexed cost base of an asset. Subsection 160ZM(3A) amounts do not reduce the indexed cost base of an asset.

No adjustments are made under subsection 160ZM(3A) to non-assessable distributions when calculating the reduced cost base of an asset. If a taxpayer claims a loss on the disposal of units in a unit trust where non-assessable distributions have been received, subsection 160ZM(3A) is not taken into account in the calculation of the reduced cost base for purposes of paragraph 160ZM(2)(b).