Australian equities produce above-average dividends
Australian income-oriented equities strategies have managed to deliver to their expectations and achieved above-average franked dividends and unitholder distribution yields, according to Morningstar’s study on income and tax for Australian equity funds.
The report, which focused on the importance of understanding by investors a fund’s income distributions, found that abnormally high fees might eat into income distributions.
“Funds most susceptible to this factor are those that earn a high-performance fee without commensurate net realised capital gains,” the report said.
Also, according to the study, the very large income distributions often occurred when managers decided to distribute outsize realised capital gains.
At the same time, it showed that the relationship between portfolio turnover and a fund’s tax effectiveness wasn’t clear-cut.
Morningstar said that some level of turnover could be beneficial to when it came to managing a fund’s tax-cost base and could limit the potential for “a chunky portion of taxable realised capital gains in distributions” but this would require “sensible tax-lot management” to offset capital gains and losses.
Also, investors could benefit from disclosure of a fund’s unrealised capital gain or loss status, the study showed.
“On balance, the era of accumulated tax-loss carryforwards appears to be ending this cycle, but the date is always relevant,” it said.
The final finding was that the new Attribution Managed Investment Trust (AMIT) tax regime may help limit the impact of ongoing unitholders being faced with a lumpy income distribution.
AUTHOR
Oksana Patron
Recommended for you
BlackRock Australia plans to launch a Bitcoin ETF later this month, wrapping the firm’s US-listed version which is US$85 billion in size.
Financial advisers have expressed concern about the impact including private market exposure is having on their tracking error budget, according to MSCI.
State Street will restrict its membership of global climate alliance Net Zero Asset Managers after the organisation dropped its flagship 2050 goals amid ESG backlash from the US.
Betashares has launched a global shares and a global infrastructure ETF as part of the firm’s strategic expansion strategy to support financial advisers in building more diversified portfolios.
