Treasury on Mon 19.1.2015, released for comment, an exposure draft of legislation, which proposes to amend the income tax law to provide look-through income tax treatment for instalment warrants and instalment receipts.

Under the proposed changes, the investor in the instalment warrant or receipt will be treated as the owner of the asset of the instalment warrant or receipt trust (with some exceptions), instead of the trustee. This means that the trust will be ignored and anything that happens to or results from being the owner of the asset, such as receiving dividends and franking credits, will affect the investor and not the trustee.

Treasury noted that as part of the announced but unenacted measures process, the Government announced on 14 December 2013 that it would proceed with the proposal. According to the Government, the changes will remove uncertainty about the taxation treatment of such arrangements and will prevent disruption of the significant market that existed for such arrangements at the time of announcement of the proposal.

PROPOSED DATE OF EFFECT: The amendments are proposed to apply to assets that vest in the trust in the 2007-08 and later income years. The Government says the changes, which are beneficial to taxpayers and confirm industry practice, are retrospective to broadly align with the application date of the provisions which allow superannuation funds to enter into limited recourse borrowing arrangements.

COMMENTS are due by 13 February 2015

[LTN 11, 19/1/15]