On 21.3.2018, the ATO issued a product ruling and an addendum to a 2015 product ruling, for the Perpetual WealthFocus Investment Advantage Fund. This was prompted by the Fund electing into the Attribution Managed Investment Trust (AMIT) regime from the 2017-18 income year under Part 3-25 of the ITAA97 (Divisions 275 & 276).
The fund had a particular structure that an investor got a single unit, even though each investor’s unit was worth different amounts and gave a right to different amounts of income. These redemption and income rights are based on the value of each unit, which, in turn is adjusted at various times, including on a unit holder/investor changing the asset class in which their unit (or part thereof) is invested.
Both product rulings consider the tax consequences of changing the portfolio structure, contributing to and partially redeeming an investment in a unit in this AMIT. The ruling sought and obtained, was that the existing (only) unit, issued to each investor, was a single asset.
Product Ruling PR 2018/4, which applies from 1 July 2018, states, at para 15, that:
- (a) Changing the Investor’s portfolio structure (see paragraph 19(f) of this Ruling) will not constitute a CGT event for an Investor for the purposes of Division 104.
- (b) An additional investment into the Fund by an Investor to an existing Unit will be included in the cost base and the reduced cost base of the Investor’s Unit in the Fund under sections 110-25 and 110-55 respectively.
- (c) An additional investment into the Fund by an Investor to an existing Unit will not alter the acquisition date of that Unit under section 109-10.
- (d) When an Investor makes a partial withdrawal of their investment in the Unit, the amount withdrawn will, for the purposes of making an annual adjustment to the cost base and reduced cost base of the Unit under section 104-107B, be included in the Unit’s ‘AMIT cost base reduction amount’ for the income year under section 104-107D.
- (e) The anti-avoidance provisions contained in Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) will not apply to a change in an Investor’s portfolio structure, the making of an additional investment to, or a partial withdrawal from, a Unit.
The Addendum to Product Ruling PR 2015/4 amends this product ruling to incorporate the issue of new scheme documents and to include the fund’s election to be treated as an AMIT. The Addendum applies from 8 April 2015
22.2.18
[ATO website: PR 2018/4, PR 2015/4A1; FJM; LTN 55, 21/3/18; Tax Month March 2018]
Study questions (answers provided)
- Were these rulings prompted by the Perpetual fund electing into the ‘Attribution Managed Investment Trust (AMIT) regime.
- Were investors, in this AMIT, issued multiple units?
- Was one of the views, expressed in the ruling, that an investor does not have a CGT event by changing investment portfolios?
- Was one of the views, expressed in the ruling, that an investor gets an increase in its cost base for a further investment in an existing unit?
- Was one of the views, expressed in the ruling, that an additional investment, does not affect the investor’s date of acquisition?
- Was one of the views, expressed in the ruling, that there will be a reduction in the investor’s cost base, when an investor makes a partial withdrawal?
- Was one of the views, expressed in the ruling, that Part IVA will not apply to an investor changing its investment portfolio?
[answers:1.yes;2.no(aSingleUnitOnly-aDefiningFeature)3.yes;4.yes;5.yes;6.yes;7.yes]