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Board of taxation review of managed investment trusts
- By Allan Mortel
- Published 31/10/2008
- Moore Tax News
- Unrated
The Board of Taxation has released a discussion paper on their review of the current tax arrangements for Managed Investment Trusts (MIT). The purpose of the review is to provide options for introducing a specific tax regime for managed investment trusts to reduce, complexity, increase certainty and minimise compliance costs.
The Board has developed this discussion paper to facilitate stakeholder consultation.
The outcomes of the reform are intended to be based on the following principles:
1. The tax treatment for trust beneficiaries who derive income from the trust should largely replicate the tax treatment for taxpayers as if they had derived the income directly.
2. In recognition of the tax advantages available to trusts that are not available to companies deriving business income, flow through taxation of income from widely held trusts, such as managed investment trusts, should be limited to trusts undertaking activity that is
primarily passive investment.
3. Beneficiaries should be assessable on their share of the net income of a trust whether it is paid or applied for their benefit, or they have a present right to call for immediate payment.
4. The trustee should be liable to tax on the net income of the trust that is not assessable to beneficiaries in a particular income year.
5. Trust losses should generally be trapped in the trust subject to limited special rules for their utilisation.
The discussion paper has identified several contentious issues facing the managed funds industry, including:
• the revenue-capital distinction
• double taxation of capital gains
• the appropriate method of beneficiary taxation (i.e. quantum v proportionate)
• whether Division 6 is an exclusive code for the taxation of MIT’s.
Moore Stephens welcomes the review as the industry has been lobbying the Government for years to introduce a legislative framework that in particular instances reflects the current administrative practice of the Australian Taxation Office (ATO). For these particular instances, such as the treatment of ‘unders’ and ‘overs’, the proposed specific tax regime for MIT’s will ideally represent a codification of the current ATO administrative practice. For others, such as the revenue-capital distinction, enabling the Capital Gains Tax (CGT) provisions to be the primary code in calculating gains and losses for specified investments by MIT’s would be consistent with the Government policy objective of making Australia the
financial services hub of Asia. Also, the review process should ensure that the proposed regime will not create any unintended consequences.
As part of the consultation process, consultation forums will be held in Melbourne and Sydney in mid-November. The closing date for written submissions is 19 December 2008. Moore Stephens will make a submission. You may wish to make your own submission.
For a copy of the discussion paper, please click here.
For further information contact Stephen O'Flynn on (03) 9614 4444, soflynn@moorestephens.com.au or Allan Mortel on (02) 8236 7700, amortel@moorestephens.com.au
The Board has developed this discussion paper to facilitate stakeholder consultation.
The outcomes of the reform are intended to be based on the following principles:
1. The tax treatment for trust beneficiaries who derive income from the trust should largely replicate the tax treatment for taxpayers as if they had derived the income directly.
2. In recognition of the tax advantages available to trusts that are not available to companies deriving business income, flow through taxation of income from widely held trusts, such as managed investment trusts, should be limited to trusts undertaking activity that is
primarily passive investment.
3. Beneficiaries should be assessable on their share of the net income of a trust whether it is paid or applied for their benefit, or they have a present right to call for immediate payment.
4. The trustee should be liable to tax on the net income of the trust that is not assessable to beneficiaries in a particular income year.
5. Trust losses should generally be trapped in the trust subject to limited special rules for their utilisation.
The discussion paper has identified several contentious issues facing the managed funds industry, including:
• the revenue-capital distinction
• double taxation of capital gains
• the appropriate method of beneficiary taxation (i.e. quantum v proportionate)
• whether Division 6 is an exclusive code for the taxation of MIT’s.
Moore Stephens welcomes the review as the industry has been lobbying the Government for years to introduce a legislative framework that in particular instances reflects the current administrative practice of the Australian Taxation Office (ATO). For these particular instances, such as the treatment of ‘unders’ and ‘overs’, the proposed specific tax regime for MIT’s will ideally represent a codification of the current ATO administrative practice. For others, such as the revenue-capital distinction, enabling the Capital Gains Tax (CGT) provisions to be the primary code in calculating gains and losses for specified investments by MIT’s would be consistent with the Government policy objective of making Australia the
financial services hub of Asia. Also, the review process should ensure that the proposed regime will not create any unintended consequences.
As part of the consultation process, consultation forums will be held in Melbourne and Sydney in mid-November. The closing date for written submissions is 19 December 2008. Moore Stephens will make a submission. You may wish to make your own submission.
For a copy of the discussion paper, please click here.
For further information contact Stephen O'Flynn on (03) 9614 4444, soflynn@moorestephens.com.au or Allan Mortel on (02) 8236 7700, amortel@moorestephens.com.au
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