For example: if an investment asset is treated as a capital gains taxable asset and it is realised within a period of less than 12 months from the date of acquisition of the asset, it will be taxed at rate of 15 per cent of the gain. However, if the asset is treated as a capital gains taxable asset and it is realised after 12 months from the date of its acquisition, only two-thirds of the gain will be subject to tax at the nominal tax rate (15 per cent). This means that the equivalent Tax Rate applicable for such assets reduces to 10 per cent.

The face value of each type of FITB is also influenced by two factors: • Certainty (or otherwise) of being able to utilise the FITB in the future; and • Determining how far into the future that utilisation of the FITB might occur. Certainty of utilisation of an FITB in the future is a function of: • whether or not the entity will remain a going concern for a sufficient time into the future to be able to utilise the FITB; and • whether or not the entity will incur, in the future, sufficient matchingtype tax liabilities to offset against the FITB and thus reduce the fund’s net tax position.

“Going concern basis” means, in the preparation of a financial report of the fund, that the entity is viewed as a going concern and expected to: • be able to pay its debts as and when they fall due; and • continue in operation without any intention or necessity to liquidate or otherwise wind up its operations. If a fund cannot be defined as a going concern or there is uncertainty about its ability to meet that concept in the future, then the value of any intangible asset (such as an FITB) will be called into doubt.

Such doubt would cause the value of the intangible asset to be written down and thus also lead to a reduction in the fund’s net asset value. Most super funds are likely to be virtually certain that they can meet the going concern test (both today and in the future). Trustees should however note that whilst the fund as a whole may be able to be viewed on a going concern basis, there may be potential to see that individual investment options may not always be able to satisfy the same test.

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