Equalisation

If you buy income units in a fund between its dividend dates, the fund will hold a balance representing income generated by the fund's investments but not yet paid out. The price of the units in the fund will be higher to reflect this extra balance.

Your first income payment from the fund will be made up of the income generated since the date you bought units in the fund, and an ‘equalisation’ payment. This equalisation payment isn’t income, but reflects the fact you paid a higher unit price for the fund owing to the income balance already built up – even though it wasn’t payable to you.

An equalisation payment isn’t classed as income for tax purposes – instead it’s a return on your original investment.