The Assistant Treasurer David Bradbury, late Mon 5.8.2013, announced 2 further changes to the proposed new tax system for managed investment trusts (MITs) in response to issues raised by the MIT industry in the course of consultation.
Mr Bradbury said the changes relate to the under or over attribution of net income that is in excess of the de minimis threshold, as well as the application of the proposed arm’s length rule, which is aimed at preventing the circumvention of the eligible investment business (EIB) rules and protecting the corporate tax base.
The changes address concerns that the proposed tax treatment of the under or over attribution of net income may be unreasonable under certain circumstances, when compared to the tax profile of many MIT investors, as well as concerns that the proposed arm’s length rule unnecessarily applies to certain services provided to a MIT by a related entity.
To address these issues, Mr Bradbury said the Government will:
- allow an under or over attribution of net income in excess of the de minimis, that is not caused intentionally by the trustee, to be carried forward, subject to certain integrity measures; and
- carve out certain services, from the application of the proposed arm’s length rule, between a MIT and an associate of the MIT.
Following the Government’s earlier announcement of changes to the MIT Withholding Tax Regime as it applies to foreign pension funds, the Assistant Treasurer also announced that the Government would continue to consult with industry following the election to ensure that the MIT Withholding Tax Regime operates as intended in a way that provides certainty and maintains the integrity of the Regime and having regard to current industry practice. This includes in relation to circumstances where a non-resident’s share of net income exceeds the distribution amount.
Mr Bradbury said the Government intends to consult on and finalise these issues as part of the continued consultation on the new tax system for MITs.
Source: Assistant Treasurer’s media release No 151, 5 August 2013
[LTN 150, 6/8/13]