30 June Unit Price Drop

Why Do Managed Fund Unit Prices Drop and Freeze on 1 July?

If you hold units in a managed fund, you might notice something curious at the start of each financial year: on 1 July, the unit price often drops sharply and may even be temporarily frozen. While this can seem alarming at first glance, it's actually a normal and expected part of the fund’s annual tax process.

What’s Happening Behind the Scenes?

Managed funds are required to calculate and distribute their net taxable income to investors each financial year. This includes:

• Interest and dividends earned
• Capital gains from selling assets
• Deductions like management fees or losses

On 30 June, the fund works out your share of this taxable income based on how many units you hold. This income is then distributed to you, often not as cash, but as a reinvestment (more units) or reported as income for your tax return.

To reflect that this income has been distributed, the unit price is reduced by the same amount on 1 July. This drop doesn’t mean you’ve lost money — it simply reflects that part of your investment return is now being accounted for as a distribution.

Why Is the Unit Price Frozen?

In some cases, the unit price may be temporarily frozen on 1 July and for a few days after. This happens because the fund is finalising:

• Taxable income calculations
• Distribution amounts
• Attribution of capital gains or losses

Once the fund completes its financial reporting, normal pricing resumes, usually within a week or two.

Real-World Example:

Let’s say you hold 1,000 units in the ABC Australian Equity Fund.

• On 30 June, the unit price is $1.80
• The fund declares a distribution of $0.10 per unit based on the income earned during the year
• On 1 July, the unit price drops to $1.70

You haven’t lost value — instead, you now have either:

• $100 reinvested back into the fund (giving you more units), or
• $100 reported as income on your tax return if you took the distribution in cash

What This Means for You

This price adjustment is simply a tax accounting process and doesn't mean the fund has performed poorly. In fact, distributions are part of your total return. If you’re reinvesting, you’re using these distributions to buy more units at the new (lower) price — effectively compounding your investment.

Tip: If you receive large managed fund distributions each year, it’s worth checking whether you’ve got enough cash set aside for the tax you may owe. The distribution is assessable income even if it’s reinvested.

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