Are rebates taxable income?

[JenD]

Hi all,

We've invested in some funds through InvestSMART, and have received a nice check - which is the "rebate" of their sales commission....is this rebate check taxable income??

Thanks for your help!

Cheers,
Jen

[DaleGG]

Hiya Jen

Depending upon how your accountant looks at it, the rebate will be treated as either:

taxable income; or
a reduction in your cost base fro CGT purposes

I'd personally opt for the latter option because ut defers any tax payable on this money.

Have fun

Dale

Hi all,

We've invested in some funds through InvestSMART, and have received a nice check - which is the "rebate" of their sales commission....is this rebate check taxable income??

Thanks for your help!

Cheers,
Jen

[JenD]

Thanks Dale, I like that second option too! :D

Cheers,
Jen

[Theo]

Depending upon how your accountant looks at it, the rebate will be treated as either:

taxable income; or
a reduction in your cost base fro CGT purposes

I'd personally opt for the latter option because ut defers any tax payable on this money.


Hiya

JenD talks about "funds" (plural). If the rebate is treated as a reduction in cost base, which fund is it against?

Or does it reduce the cost base of all funds according to some kind of apportionment rule?

Ta

[coopranos]

I would have thought it was a reduction in expenses.
Im assuming they give you a statement at the end of each year, stating something like: Sales commissions: $10,000 rebates received: $2,000
Surely you would treat commissions paid each year as an administrative cost of the investment? If that is the case you could either just say $8,000 net sales commission expenses or $10,000 expenses and $2,000 income, both of which would give the same net result.
if you receive these rebates each year, then chances are the most accurate way is to treat it as income. If it was a once off rebate after the purchase of the investment, you probably have a stronger argument for it being a cost base adjustment.

[DaleGG]

Hi

Fees paid to a financial planner to create an investment plan and/or to implement that plan are not tax deductible. They form part of the cost base of the assets in that plan...hence my suggestion that the rebate should be a reduction in the cost base for CGT purposes.

Jen clearly states that the rebate was in relation to a sales commission and not to an ongoing trailer commission.

Have fun

Dale

[JenD]

Thanks for the replies!

I think DaleGG is reading my question correctly,

I wasn't sure how specific I should be - not trying to promote anything, but I'd like to understand our tax correctely so.....Basically we bought iinto 1 managed fund with Macquarie - I believe you could buy it directly though them, or anyone else you chose - they present whoever you buy it with a 2.5% sales commission. We chose to buy it through InvestSMART, which refunds the sales commission (i.e. we paid NO fees - what we paid for is exactly the amount of shares we got) - but a couple months later received a nice rebate check for 2.5% amount the shares we purchased, which was their sales commission (hence why we bought it through them and not straight through Macquarie) - and now just wondering if that rebate is taxable?

Cheers,
Jen

[coopranos]

In that case it sounds like DaleGG is correct.
I was assuming they were ongoing administration type fees associted with managed funds.
The rebate will be a cost base adjustment: your cost base is increased by 2.5% for the sales commission, then reduced by 2.5% for the rebate. net effect = NIL.

[handyandy]

Thanks for the replies!

I think DaleGG is reading my question correctly,

I wasn't sure how specific I should be - not trying to promote anything, but I'd like to understand our tax correctely so.....Basically we bought iinto 1 managed fund with Macquarie - I believe you could buy it directly though them, or anyone else you chose - they present whoever you buy it with a 2.5% sales commission. We chose to buy it through InvestSMART, which refunds the sales commission (i.e. we paid NO fees - what we paid for is exactly the amount of shares we got) - but a couple months later received a nice rebate check for 2.5% amount the shares we purchased, which was their sales commission (hence why we bought it through them and not straight through Macquarie) - and now just wondering if that rebate is taxable?

Cheers,
Jen

Hi Jen

That's interesting. I looked at their site and they seem to indicate that that issue further units in the investment rather than send a 'cheque'.

It must be dependent on the situation as to how they treat the rebate ie cheque of further investment.

I will certainly be using them in my next foray into managed funds. I am also looking at moveing some current MF to them to receive any ongoing commissions rather than have a FA receive them.

Cheers

[JenD]

The rebate will be a cost base adjustment: your cost base is increased by 2.5% for the sales commission, then reduced by 2.5% for the rebate. net effect = NIL.

That's exactly what I was hoping to hear! Thanks! :D

Hi Jen

That's interesting. I looked at their site and they seem to indicate that that issue further units in the investment rather than send a 'cheque'.

It must be dependent on the situation as to how they treat the rebate ie cheque of further investment.


Hi handyandy,

My understanding is that if there is an "entry fee" then this is rebated through the issue of additional units in the amount of the fee. If they receive a "sales commission" then they send you a rebate check for that amount. As each investment is different, you'll need to check - they disclose this next to each investment from what I've seen.

Cheers,
Jen