Ray Lester, general manager of delivery services at NAB, said that by working at the propagated level, “tax parcels are chosen from a greater pool and can therefore be selected in a manner that produces a lower total capital gains tax figure – this enables us to maintain an advantageous tax position for our clients. “
“Previously, sub-portfolios were created to allow investment decisions of a reporting entity to be delegated to their various investment managers. These were sub-sets of the total holding of the entity, and often individual managers would hold parcels of the same security as their counterparts.”
“Because of this segregation, parcel selection for capital gains tax was only able to be applied using the parcels available to each manager individually. Now, propagation will group the parcels of linked sub-portfolios and allow the tax allocation method to be applied to all parcels.
Lester said the fact that all the data was consolidated at the outset reduced risk in the process.
NAB is now looking to progressively roll-out the system across its entire client base, as it believes the potential tax savings through propagation for large superannuation funds are substantial.