Taxation Information
Taxation of Australian Resident Individual Unitholders
The taxation commentary below assumes the investor in the Trust (Unitholder) is an Australian resident individual taxpayer who holds their investment in the Trust on capital account. The commentary is intended as a brief guide only and is therefore general in nature. The taxation of a unit trust investment, such as units in the Trust, can be complex and may change over time. Accordingly, it is recommended that Unitholders seek professional taxation advice in relation to their own position.
Taxation of Distributions
Unitholders will be required to include their share of the taxable income of the Trust in their assessable income in the year in which their entitlement to the income of the Trust arises. A Unitholder's share of the taxable income of the Trust for the year ended 30 June must therefore be included in the Unitholder's assessable income for the financial year ended on that date. This applies irrespective of whether the Unitholder's share of the income of the Trust is distributed (paid) to the Unitholder in a subsequent year or reinvested in the Trust.
Distributions from the Trust may include various components, the taxation treatment of which may differ. It is expected that distributions from the Trust could include both foreign sourced income (e.g. from the TKs or TMKs) and Australian sourced income (e.g. from hedging contracts). A distribution from the Trust to a Unitholder may also include a tax-deferred component, a capital gains tax (CGT) discount concession component, as well as net capital gains and interest income.
Tax-deferred distributions typically arise from property investments which attract building allowances, depreciation allowances and other tax timing differences. Tax-deferred distributions are not assessable when received unless and until the total tax-deferred amounts received by a Unitholder exceed the Unitholder's CGT cost base of the Units. For CGT purposes, amounts of tax-deferred distributions received reduce the Unitholder's cost base of their Units and therefore affect the Unitholder's capital gain/loss on disposal of the Units.
Where an asset that is owned by the Trust for at least 12 months is disposed of, the Trust may claim a 50% CGT discount concession on the capital gain realised. The CGT discount concession component of a distribution by the Trust will represent the CGT discount claimed by the Trust in respect of asset disposals. The CGT discount concession component is not assessable income when received by Unitholders. Where a Trust distribution includes a CGT concession component, that component will not reduce the cost base of the Units held by a Unitholder.
The capital gain component of a Trust distribution must be included in the Unitholder's calculation of their net capital gain. Where the distributed capital gain includes a discount capital gain, the Unitholder is required to include the "grossed up" amount of the discount capital gain in their net capital gain calculation. The "grossed up" amount is calculated by multiplying the discount capital gain component by 2. A Unitholder who is an individual may be entitled, in their own right, to apply a CGT discount concession.
Click here to download a summary of the taxation profile of BJT Distributions
Foreign Tax Credits
Japanese withholding tax will be imposed on distributions from the TKs or TMKs. These distributions will be foreign sourced income of the Trust and therefore will be foreign sourced income of the Unitholders.
Unitholders may be able to claim foreign tax credits for the Japanese withholding tax against the Australian tax payable on foreign sourced income.
Under the foreign tax credit rules applicable for the year ended 30 June 2007, the credit is only available to offset against Australian tax payable on foreign sourced income of the same class (i.e. foreign passive income). The amount of the foreign tax credit available in respect of each class of income will generally be equal to the lesser of:
(a) the Australian tax payable by the Unitholder on foreign sourced income of the passive class; or
(b) the Unitholder's share of the Japanese withholding tax imposed on the Trust.
If foreign tax credits are available to a Unitholder but cannot be used by a Unitholder in the year they arise, the credits may be able to be carried forward by the Unitholder for up to five years and be used as a credit against future Australian tax payable on foreign sourced income of the passive class.
Unitholders should be aware that there may be circumstances when Australian tax law prevents the Trust from passing the foreign tax credits on to Unitholders, for example, where the Trust is in an overall tax loss position in respect of the certain class of foreign income to which the foreign tax credits relate.
Click here to download a summary of the foreign tax credit profile of BJT Distributions
Disposal of Units
A disposal of Units in the Trust will have CGT implications. Broadly, Unitholders must include any realised capital gain or loss in the calculation of their net capital gain. A net capital gain will be included in the Unitholder's assessable income. A net capital loss may be carried forward until the Unitholder has realised capital gains against which the net capital loss can be offset. It is noted that in calculating a net capital gain a Unitholder may be entitled to a CGT discount where they have held their Units for 12 months or more. The discounting factor for individuals is 50%.
Tax File Numbers and Australian Business Numbers
Unitholders are not required to quote a Tax File Number ("TFN"). However, if a Unitholder has not quoted its TFN or declared a permitted exemption from quoting the TFN, tax is required to be deducted from any income distribution at the highest marginal tax rate plus Medicare levy (currently 46.5 per cent).
Unitholders that hold Units as part of their business may quote their Australian Business Number instead of their TFN.
2007/08 Information
The interim distribution for the period ended 31 December 2007 from the Trust includes the following components*:
Australian Other - 30%
Australian Interest - 2%
Foreign Modified Passive - 35%
Tax Deferred - 33%
* Estimate only. The taxable components of the distribution will be advised in the Annual Tax Statement for the year ending 30 June 2008.
Babcock & Brown Japan Property Management Limited, the Responsible Entity of Babcock & Brown Japan Property Trust, considers that Babcock & Brown Japan Property Trust is a managed investment trust for the purposes of section 12-395 of Schedule 1 to the Taxation Administration Act 1953, in relation to its income year ending 30 June 2008, and gives the following notice to you as recipient of the payment outlined above.