Budget 2019: ETF investors should do nothing

There isn’t enough information for investors to do anything at the moment, so it’s worth doing nothing – for now

Ruth Saldanha 26 March, 2019 | 2:00PM

Last Wednesday, the Liberal Federal government presented its budget before heading into the election in October. The budget focused on home buyers. However, it also addressed what it called “unfair tax advantages”.

To make the system fairer, the Budget proposed to “prevent the use by mutual fund trusts of a method of allocating capital gains or income to their redeeming unitholders where the use of that method inappropriately defers tax or converts fully taxable ordinary income into capital gains taxed at a lower rate.”

Under this change, the mutual fund trust (ETFs are a type of mutual fund trust) would be prohibited from deducting any excess allocation in computing its income for the taxation year, and instead the excess allocation would need to be distributed to the remaining unitholders at the end of the year, explains Joseph N Micallef, partner and national financial services tax leader at KPMG.

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Ruth Saldanha

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca

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