Copper,I have had a look at your question and I think the...

Copper,
I have had a look at your question and I think the following should clarify the overall situation.

The following is my understanding only of the BJT tax position.

Firstly it is necessary to understand two basic concepts, these being:
Taxable income-This is the assessable income of the trust calculated in accordance with the tax laws after taking into account all items of income, capital and expense. For purposes of calculation of taxable income the difference between the nature of income, ie capital and revenue, is irrelevant.

Trust income-Under Bamford this is the amount of income that the trust may distribute after taking account of trust deed clauses and considering “reasonableness matters”, such as unit holder expectations of a distribution. If a trust deed allows the deduction of an item from income that is clearly capital in nature, then bamford allows the Trustee to deduct this in determining trust income.

Next you need to look at the ratio of trust income to taxable income. This is best illustrated by an example. All figures are cents and rounded for ease of calculation. This is an important concept.

Trust income =10 cents, Taxable Income=20
a) If 100% of trust income is distributed (ie 10 cents), then the unit holder will be assessed on 100% of taxable income (ie 20 cents).

b) If 50% of trust income (i.e. 5 cents) is distributed then the unit holder will be assessed on 50% of taxable income (ie 10 cents). The balance of taxable income will be assessed in the hands of the trustee at the top marginal rate ie 46.5%.

c) If more that 100% of trust income is distributed (say 12 cents), then 100% of taxable income is assessable in the hands of the unit holder.

Generally the determination of who picks up the liability is the registered holder at distribution date, i.e. 24 June.

I expect June 24 holders will pick up the liability for the year. BJT may have made some form of provision at half year, but I have not checked it.

Applying the above concepts to the BJT numbers per distribution announcement my take on the tax position is:
• Taxable income for the year 19.5
• Trust income for the year 12.5 (this number is not evident, it is being assumed as being equal to the net operating cashflow per announcement)
• Distribution for the year 9

If you held BJT for part of the year only and applying the concepts above, then you would end up with:

1) Receive a cash distribution of 5 cents being the June 30 distribution ( if you held for the full year you would have received 2 distributions totalling 9 cents.)

2) June 30 tax statement will show a assessable income of 14 cents (9/12.5 x 19.5). Calculated as per b above.

3) Line 2 equates to 5.6 cents tax payable at 40%, or 3.5 cents at 25% tax rates (the lower the rate the lower the amount).

4) Offsetting the tax liability at line 3 is the 2.5 cents credit for Japanese tax paid.

5) The balance of taxable income not distributed (19.5-14 cents) of 5.5 cents will be taxed at the top marginal rate in the hands of the trust.

Assumptions
a) I have not taken account of any tax provision established for the Dec 31 distribution.
b) The taxable line of 14 cents will be split between capital and revenue on the annual statement sent to unitholders post balance date.
c) Only personal tax considerations have been considered.
d) 12.5 cents is the trust income.
e) For simplicities sake I have assumed 2 distributions totalling 9 cents assessable in the 2008/9 year.

Using 2008/9 rates the average tax rate up to $60k is 19%. At 19% the tax payable on taxable income of 14 cents is 2.7 cents, against which the 2.5cents Japanese credit can be offset. Hence the distribution will be virtually tax free, thus representing a six month return of 12.5% on a capital cost of 40 cents per unit.

To me that is a pretty good return, but the higher your tax rate the greater the impact of tax and lower the after tax return.

The above is only my understanding of the situation and you must form your own view.

Good luck to holders