# Gross Funds Vs Net Funds



## donntxu (30 Jul 2007)

Stupid question to ask.  Can anyone explain the difference between a gross fund and a net fund.  I think it has something to do with the tax treatment but could be wrong.


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## ClubMan (30 Jul 2007)

Moved from . 

Net funds have tax deducted on growth as it is earned and this deduction is reflected in the daily unit price. Gross funds do not and it is only when you encash them that 23% exit tax is deducted from any growth earned.


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## donntxu (2 Aug 2007)

Thx Clubman 

Apologies for incorrect location ....first time poster


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## capall (2 Aug 2007)

Arises because of a change in the tax laws

All funds are  gross now as far as I know and you can't buy into an older net fund


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## ClubMan (2 Aug 2007)

capall said:


> All funds are  gross now as far as I know and you can't buy into an older net fund


Are you sure? I thought that you could still buy into some net funds? _EBS_ used to offer both net and gross funds at the same time up to recently.


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## capall (2 Aug 2007)

No I'm not sure ,maybe its only funds set up since the change which must be gross but all the old funds can roll on indefinitely taking new investors ?


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## camlin90 (4 Aug 2007)

capall said:


> No I'm not sure ,maybe its only funds set up since the change which must be gross but all the old funds can roll on indefinitely taking new investors ?


Correct - if you have a life assurance policy issued pre 2001, for instance, you can still pay in new money to the net fund.
I'm not aware of any reason why you should prefer net over gross though


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## ClubMan (4 Aug 2007)

John J said:


> I'm not aware of any reason why you should prefer net over gross though


In some cases (usually depending on the timeframe involved) the different tax treatment of one over the other can be advantageous from an investor's point of view. I recall this being discussed on _AAM _when gross funds came in first but that's a while back now so the thread(s) may not exist.


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## capall (6 Aug 2007)

Under the gross method the full amount of the gain is reinvested under the net method tax is deducted each year so you have less available to reinvest
Even though you pay tax on the gains when exiting the gross funds do you not have the benefit of the tax amount being invested for the years before encashment ?


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## z108 (7 Aug 2007)

When I used to be invested in EBS summit funds and  a new  net tax system came out , they gave me the option of remaining in the old net fund or transferring to the new gross fund. This was at least 4 years ago but they did projections of returns under each taxation system and the result I remember being that its always better if you remain invested long term (10 years) to be in the gross roll over fund. However if you are a short term investor (about 5 years) its better to remain in the net fund.
This is further complicated by the new rule where its taxed every (i think) 7 years ? But when there were only 2 choices between gross  or net that was the situation 
I'm glad I stayed in the net fund as I cashed in all my money with the EBS (medium term at a profit) because regardless of  the tax situation, another factor is the professionalism of the people you entrust your money with.


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