Budget tax break for LICs
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Tuesday, 29 May, 2001 - 22:00
THIS year’s Federal Budget had good news for more than 100,000 investors in Listed Investment Companies (LICs).
The Government announced that, from July 1, the 50 per cent discount on capital gains tax will be extended to LICs, such as Australian Foundation Investment Company, Argo Investments and Australia United Investments.
This brings LICs into line with managed funds, which have qualified for the discount since it was introduced in September 1999.
The decision reflects the fact that LICs operate in a similar manner to managed funds – they both manage a large investment portfolio on behalf of individuals. The discount will apply where an LIC (or managed fund) sells one of its underlying investments, realises a capital gain and distributes the resulting profit to its shareholders (or unit holders).
The original exclusion of LICs from the capital gains tax discount led to a sell-off of their shares, which have since been trading at a substantial discount to net asset backing.
The Budget decision has triggered solid buying of the shares, although it is too early to say if the sell-off will be fully reversed. The move will put LICs on a level playing field with managed funds and allow investors to judge them on their merits.
The Government announced that, from July 1, the 50 per cent discount on capital gains tax will be extended to LICs, such as Australian Foundation Investment Company, Argo Investments and Australia United Investments.
This brings LICs into line with managed funds, which have qualified for the discount since it was introduced in September 1999.
The decision reflects the fact that LICs operate in a similar manner to managed funds – they both manage a large investment portfolio on behalf of individuals. The discount will apply where an LIC (or managed fund) sells one of its underlying investments, realises a capital gain and distributes the resulting profit to its shareholders (or unit holders).
The original exclusion of LICs from the capital gains tax discount led to a sell-off of their shares, which have since been trading at a substantial discount to net asset backing.
The Budget decision has triggered solid buying of the shares, although it is too early to say if the sell-off will be fully reversed. The move will put LICs on a level playing field with managed funds and allow investors to judge them on their merits.