Australia’s 2016-2017 Budget introduces new Collective Investment Vehicles

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New Collective Investment Vehicles

In the Australian Government’s 2016-2017 budget papers, it will introduce two new collective investment vehicles (CIV):

  • a corporate collective investment vehicle for the income years starting on or after 1 July 2017; and
  • a limited partnership collective investment vehicle for the income years starting on and after 1 July 2018,

which are going to be tax-effective alternatives to the current Australian ‘flow-through’ managed investment trust or unit trust structure. The corporate and partnership CIV will both be required to meet similar criteria as the managed investment trust, such as they need to be widely held and to be engaged in primarily passive investments.

The new CIVs will provide a new form of ‘flow-through’ collective investment vehicle which are generally familiar and understandable to foreign investors and will be offered to both foreign and domestic investors.

It is expected that investors of the new CIVs will generally be taxed as if they had invested directly. However, the final design of tax aspects are still subject to consultation with Treasury and industry and the rules governing the proposed CIVs will be developed in consultation with industry in consideration of existing Australian corporations law and potentially partnership laws.

Asia Region Funds Passport

The proposed CIV announcement is in line with Australia’s recent commitment to implement the Asia Region Funds Passport (Passport) arrangements when it signed the Memorandum of Cooperation. The Passport is an international initiative which aims to be a multi-jurisdictional regulatory framework in the Asia-Pacific region allowing for cross-border marketing and distribution of collective investment schemes.

The Passport will increase financial integration across the Asia-Pacific region and enhance access and marketability of Australia’s managed funds internationally. From an Australian perspective, the introduction of the new CIVs will improve or facilitate the effectiveness of the Passport.

One Investment Group

One Investment Group is one of Australia’s leading providers of responsible entity and trustee services with in excess of 200 funds and $10 billion under administration. Should you be considering appointing a responsible entity or trustee, please contact us.