Foreign Bond Interest (Coupon Payment with Principal repayment)

Our SMSF receives foreign bond interest on RWH Finance Bond held by MINT (BG Securities Aust P/L).

The coupon payments consist of interest and also part principal repayment. When processing this in a regular accounting package I would simply split them between interest received and the asset account for RWH (which gets swallowed up at revaluation which is all manual in SF360 because MINT is not a supported data partner.)

Can I just do the same in SF360? I have tried and it warns me saying this…

By posting this transaction, SF360 will not be able to reconcile the unrealised movement in your Financial Statements. When entering manual revaluation entries i.e. Transactions with no units entered to an investment account, a corresponding amount must be posted to the 24700 account. If you wish to adjust a cost base, please refer to the help files below for the correct steps:
How to Enter a Cost Base Adjustment
​How to Enter a Return of Capital
Do you want to continue?

Hi SUEJAM,

We have a few clients with bonds as well - we split the transaction and process the income and the manual return of capital. I don’t recall whether that warning comes up though - if it’s a unitised investment it’s important to enter a 0 in the units field, otherwise it acts as an adjustment of market value and not a return of capital.

Hope that makes sense,
Christine

Excellent work around using a zero in the units to avoid the market reval happening. Thanks for tip

Can I also ask how do you process the payment from a bond coupon payment do you put it into 360 as interest or as a dividend.

We have floating rate notes and coupon bonds with MINT partners (BGC securities) and I am really struggling on how to deal with them in sf360…

Cheers

Sue

Hi Sue,

Yes you absolutely have to use the 0 in the units, otherwise I don’t believe it has any affect on the cost base (running a CGT register report should be able to show you the cost base difference using both methods if you want to test this for yourself).

I’m not familiar with MINT partners, however for FIIG we have the securities set up as a unitised investment under 72450 (for those paid in AUD) and 72550 (for those paid in USD). The default income code attached to both of these charts is interet (under 25000/security code). We find this works for us as there are no foreign income tax credits or franking credits for these investments.

This is an example of one of the AUD transactions that is a split between interest and return of capital:

I hope that helps but feel free to reply if you have any other questions. I’m also interested if anyone else deals with these types of investments differently…

1 Like

Christine
For bonds paying P & I I have been applying the Interest to 25000 and return of principal valued at $100 (per $100) at 72000 with BGL raising its own journal @ 24700 to accommodate the change in Market value for the principal returned. It has not been suggested to me that bonds be unitised, is there a reason you prefer to do this?

Hi Rustie,

My understanding is that the chart 24700 only affects the market value, not the cost base.

In your example above it looks like you’re selling out 1,889.58 units? I’m not 100% sure about having the bonds setup as a unitized vs non-unitized investment. The first SMSF that I processed that had bonds already had them set up as unitized, so that’s how I’ve continued setting up new ones.

Thanks for the feedback Christine & Rustie

I have used account code 72000 Debt Securities (bonds, bills exchange or promissory notes) for

  • NextDC Ltd (MINT call it a Fixed Coupon Bond) (AUD)

  • ANZ Banking Group Ltd (MINT Call it a Floating Rate Note) (pays in USD)

  • Westpac Banking Corp (MINT call it a Floating Rate Note) (pays in USD)

  • RWH Finance Pty Ltd (MINT call it an inflation linked annuity) (in AUD, & has P&I coupon pmts)

I have used account code 73000 Hybrid/options, Hybrids, Futures Contacts for

  • ME Bank Ltd (MINT call it a Fixed Coupon Bond) (AUD) (has franking credits)

And for BENPG (MINT also call it Fixed Coupon Bond) (pays in AUD & has franking credits), SF360 gave it account code 77600…… eventhough it’s prob held through MINT and not in the SMSF name……

My problem is twofold, not sure I can rely on MINT’s description of what the security type is. When I researched the ISIN the results led me to use 72000 or 73000, now I’m not sure whether to roll
back and change them over.

Did you find anyone at BGL has a handle on helping to choose the right account from chart of accounts for these types of securities…… as a bookkeeper only and not an accountant I don’t know where
to place the greatest importance, the chart of account code, or just focus on the way income is processed and have the purch details correct………the accountant has never been concerned with account codes prior to SF360, was only concerned with what income is
and what happens at sale time.

If the income still feeds through to 25000 and I record the FR CR and principal repayments is that the main thing……

Any thoughts or suggestions welcome.

I am probably not the best person to advise but I can share what my account codes are (I complete the transaction matching and these were checked by an accountant at the end of last year prior to audit) Anyhow I concur with the 72000 code for Bonds of any type, ME Bank I too have held and as you describe it it too is a bond and I used 72000 for the Investment Code. Coupons I recorded against 25000, you should note that in the details you can add any franking credits if applicable. With reference to Christines comments the 24700 code is system generated so I do not get to concerned with that other than to recognised capital movement in the return of capital on the bond. in my example I received $1889.58 as principal returned (purchased back at $1) thus the system generates the capital gain/loss with the return of capital. (note that I enter bonds in whole dollars, not 100's, I just see a bond as the sale of 's with dirty face value, coupons/interest paid and Principal bought/paid back at $1 face value) Hope this does not confuse you, perhaps you may try talking to an accountant.