Draft FAF Legislation for Publication

Draft FAF Legislation for Publication

Inserts for

Tax Laws Amendment (Foreign Source Income Deferral) Bill 2011: Foreign accumulation funds

EXPOSURE DRAFT If you have any comments on this exposure draft they should be sent before 18 March 2011 to: fsiattribution@treasury.gov.au

Or
The Manager International
Tax Projects Unit
The Treasury
Langton Crescent Parkes
 
ACT 2600
 
Commencement information
Column 1 Column 2 Column 3
Provision(s) Commencement Date/Details
1.  Schedule [FAF] The day this Act receives the Royal Assent.
2.
3.

Schedule FAF—Foreign accumulation funds

Part 1—Amendments

Income Tax Assessment Act 1997

Division 806—Foreign accumulation funds

Table of Subdivisions

806‑A   FAFs: Liability rule

806‑B    FAFs: FAF attributable income

806‑C    FAFs: Limitations on liability

@806‑1  What this Division is about

[To be completed at a later time.]

Subdivision 806‑A—FAFs: Liability rule

Table of sections

@806‑5     Attribution rule for FAFs

@806‑10   Meaning of foreign accumulation fund

@806‑15   Meaning of FAF statutory accounting period

@806‑5  Attribution rule for FAFs

             (1)  Include in your assessable income for an income year the amount mentioned in subsection (2) if:

                     (a)  you have an *equity interest in another entity at the end of the other entity’s *FAF statutory accounting period; and

                     (b)  the other entity is a *foreign accumulation fund for the FAF statutory accounting period; and

                      (c)  the FAF statutory accounting period ends in that income year; and

                   (d)  you are an Australian resident, *Australian trust, or *Australian partnership at the end of the FAF statutory accounting period; and

                     (e)  the entity is not a *CFC for which you are an *attributable taxpayer at the end of the FAF statutory accounting period. 

             (2)  The amount is your *FAF attributable income (see Subdivision 806‑B) for the *foreign accumulation fund for the *FAF statutory accounting period that ends in the income year.

@806‑10  Meaning of foreign accumulation fund 

             (1)  An entity is a foreign accumulation fund (or FAF) for a *FAF statutory accounting period if:

                     (a)  the entity is:

                              (i)  a company; or

                             (ii)  a *fixed trust; and

                     (b)  at the end of the period the entity:

                              (i)  for a company—is a foreign resident; or

                             (ii)  for a trust—is not a resident trust estate for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936; and

                     (c)  the requirement in subsection (2) is met at the end of the period; and

                     (d)  the requirement in subsection (3) is met for the period.

A provision similar to section @803‑205 will be included to cover the situation where an entity changes residence during the period.

Investments requirement

             (2)  This requirement is met if the *market value of all *debt interests held by the entity comprises 80% or more of the market value of all assets held by the entity.

Accumulation requirement

             (3)  This requirement is met if the amount that:

                     (a)  for a *corporate tax entity—is *distributed within the period (the distribution period) beginning at the start of the entity’s *FAF statutory accounting period and ending 3 months after the end of that period; or

                     (b)  for a trust other than a corporate tax entity:

                              (i)  is distributed within the distribution period; or

                             (ii)  constitutes *net income of the trust that is included in the assessable income of 1 or more beneficiaries of the trust;

is no more than 80% of the amount of the profits and gains of the entity mentioned in subsection (4).

Realised and controlled profits and gains

             (4)  The amount of the profits and gains of an entity (the first entity) for a *FAF statutory accounting period is the sum of:

                     (a)  the realised profits and gains of the first entity for the period; and

                     (b)  if the first entity controls another entity at the end of the period—so much of the realised profits and gains of the other entity as:

                              (i)  are for the FAF statutory accounting period of the other entity that ends in the FAF statutory accounting period of the first entity; and

                             (ii)  are reflected in the first entity’s unrealised profits and gains for the period.

             (5)  For the purposes of paragraph (4)(b), determine whether an entity controls another entity in accordance with paragraphs @801‑30(1)(a), (b) and (c).

Regulations may prescribe other types of entity

             (6)  An entity is also a foreign accumulation fund (or FAF) for a *FAF statutory accounting period if:

                     (a)  the entity is of a kind prescribed by the regulations; and

                     (b)  the entity meets the investments requirement in subsection (2) at the end of the period; and

                     (c)  the entity meets the requirements (if any) prescribed by the regulations for the purposes of this paragraph.

Classes of interest

             (7)  If there are 2 or more classes of interest in the entity, this section operates separately in relation to each class as if the interests in that class were all the interests in that entity.

@806‑15  Meaning of FAF statutory accounting period 

             (1)  The FAF statutory accounting period of an entity is the 12 month period for which accounts are prepared in relation to the entity for the purposes of complying with the tax laws of any country.

             (2)  However, if:

                     (a)  there is no period to which subsection (1) applies; or

                     (b)  there is more than one period to which subsection (1) applies;

the FAF statutory accounting period of an entity is the 12 month period for which accounts are prepared for the purposes of reporting to the entity’s *members.

             (3)  If there is no 12 month period to which subsection (1) or (2) applies, the FAF statutory accounting period of an entity is each period of 12 months finishing at the end of 30 June.

Subdivision 806‑B—FAFs: FAF attributable income

This Subdivision will include a calculation method to work out the FAF attributable income.

The calculation will be based on the change in the market value of an interest in the FAF over the FAF statutory accounting period, plus distributions from the FAF.

Subdivision 806‑C—FAFs: Limitations on liability

Table of sections

@806‑40   Lightly taxed entities exception—complying superannuation entity

@806‑45   Lightly taxed entities exception—life insurance company

@806‑50   Lightly taxed entities exception—interposed trust or partnership with lightly taxed entity as sole member

@806‑55   Lightly taxed entities exception—interposed trust or partnership with lightly taxed entity as a member

@806‑40  Lightly taxed entities exception—complying superannuation entity

This provision will be based on section @804‑205.

@806‑45  Lightly taxed entities exception—life insurance company

This provision will be based on section @804‑210.

@806‑50  Lightly taxed entities exception—interposed trust or partnership with lightly taxed entity as sole member

This provision will be based on section @804‑215.

@806‑55  Lightly taxed entities exception—interposed trust or partnership with lightly taxed entity as a member

This provision will be based on section @804‑220.

Double tax relief 

Division 805 will be adapted to also deal with attribution credits from FAFs.

Attribution credits from FAFs will be interchangeable with attribution credits from CFCs (ie. there is one class of credit).

Attribution credits will be able to be used to convert a distribution into non‑assessable non‑exempt income, or to reduce capital proceeds, if:

              (a)     the distribution is paid on an interest in an entity, or the CGT event happens in relation to a CGT asset that is an equity interest in an entity; and

              (b)     the taxpayer has had an amount of income included under section @806‑5 for the entity for an income year; and

               (c)     the taxpayer has held at least one interest in the entity continuously since that year.

Distributions received through trusts and partnerships will be covered in the same way as they are in section @805‑15 for CFCs.

Subsection @805‑15(4) will be adapted to deal with the situation where a CFC disposes of an equity interest in a FAF.

John O’Leary

Director, Corporate Trust

John has over 19 years’ experience in the financial services industry working for a number of both domestic and global organisations. 

Prior to joining OIG, John worked for UBS, State Street, RBC, NAB Asset Servicing and MLC and has extensive experience in investment operations, custody and administration. 

John has a Bachelor of Arts Degree in Accounting and Finance from Athlone Institute of Technology and a post graduate Higher Diploma from Maynooth University. 

Emma Brown

Director, Finance & Taxation

Emma has over 17 years’ experience in accounting and taxation working largely in chartered accounting firms servicing clients from various industries including professional services and real estate. Throughout this time Emma has partnered with various business leaders in delivering quality professional advice and commercial insight. 

Emma has a Bachelor of Commerce from University of Newcastle, is a member of Chartered Accountants ANZ and is a registered tax agent. 

Garry El Hassan

Head of Registry Services

Garry comes to OIG with close to 20 years experience in the Financial Services Industry. Garry’s wide ranging financial services experience encapsulates operational functions within Registry, listed and unlisted asset management, Regulatory Reporting, Systems and Platform Management, AML/CTF Management, Remediation and Complaints  Management, and Deceased Estates Management.  

As systems owner across multiple organisations, Garry has been instrumental in the implementation and development of Registry and Advice systems from inception to maturity. With a history of developing high performing teams and elevating organisational capacity and efficiency, Garry has built a brand in the industry around seeing opportunities for development and transforming them into functional deliverables that have significant uplift for organisations and the clients. 

Notable positions Garry has held include various management roles at Macquarie Wrap Adviser Services, CommSec CBA, State Super Financial Services, First State Super and Aware Super. Garry has a Bachelor’s of Economics/ Managerial Economics from Western Sydney University. 

Monique Sheehan

Director, Client Services

Monique is a highly experienced financial services executive with an extensive background spanning over 25 years. She has held key leadership positions in both domestic and global organisations with experience including investment operations, capital markets, platform operations, custody, fund accounting, and middle office. 

Monique brings her wealth of expertise and professionalism to One Investment Group gained from her diverse roles across Macquarie Bank Ltd, State Street Australia Ltd, Australian Unity, Link Group and OneVue. 

Lisa Wilson

Head of Fund Services

With over 25 years of experience in the Custody and Fund Services industry, Lisa has managed all client operational functions including Fund Accounting, Financial Reporting, Tax, Private Equity, Middle Office, Platform and Unit Registry.  

While initially beginning her career in Fund Accounting, Financial Reporting and Tax, she soon began to build a brand as someone who could take teams through a change journey and has done so on various business transformations including IFRS and TOFA implementations, off-shoring of processes, platform migrations, on-boarding large clients, establishment of new functions and a business closure. Lisa has since been specialising in evolving operating models and leading people through change to build high performing teams. 

With her career spanning across Australia, UK, USA and Luxembourg, Lisa brings a wealth of experience in global and local organisations. Lisa is a CPA and has a Bachelor of Commerce from the University of Western Sydney. 

Tom Hure

Chief Financial Officer

Tom has over 25 years’ experience as a financial executive having led teams at listed, unlisted, joint venture, divisional, national, and government levels. Tom’s industry experience includes financial services, transport, real estate, leasing, funds management, and structured finance.

Prior to joining OIG in January 2022, Tom was Chief Financial Officer of Indigenous Business Australia, an Australian Government entity with an asset base of nearly $2 billion across housing loan, business loan and investment portfolios. Tom has also held senior finance roles at the likes of Transdev Australasia, CIMIC Group, Mirvac, ING Real Estate and Allco Finance Group.

Tom holds a Bachelor of Commerce (Accounting) from the University of Western Sydney, a Master of Commerce (Professional Accounting) from Macquarie University and is a member of Chartered Accountants Australia and New Zealand.

Steve Beland

Head of Sales

Steve has 16 years’ experience in accounting and taxation gained in funds management, corporate and professional services. Prior to joining Unity Fund Services in October 2010, he has held Tax manager roles at both Brookfield Multiplex Ltd and Everest Financial Group Ltd.

Prior to this, Steve worked for Ernst & Young providing general tax advice to corporate clients as well as being involved in a numerous tax due diligence assignments for private equity transactions. He also worked for Horwath as a Supervisor specialising in the provision of taxation and business services to high-net-worth individuals and SME businesses including a secondment to the Chicago (USA) office.

Steve is a Chartered Accountant, Registered Tax Agent and Chartered Tax Adviser of the Tax Institute of Australia. Steve holds a Bachelor of Commerce (Accounting) and Master of Taxation from the University of Sydney.

Michael Sutherland

Head of Corporate Trustee Services

Michael has over 25 years’ experience in the financial services industry including 12 years’ experience in providing trustee, custody and administration services to the debt capital markets and funds management industry.  

In this time Michael spent 7 years at Perpetual Limited where he was a senior lawyer in Perpetual’s legal teams. Michael has also spent a number of years in other business and legal roles including working in large, medium and boutique fund managers, retail banks, investment banks, structured credit providers and hedge funds, such as ANZ, ABN AMRO, AMP, Everest and Absolute Capital.  

Michael also has experience acting as an executive director of Responsible Entities, ASX listed companies (executive director and company secretary) and acting as a member of investment, product, risk, audit and compliance committees. 

Michael holds a Bachelor of Laws from University of Technology Sydney and a Bachelor of Arts from Macquarie University. He is a member of the Australian Securitisation Forum, the Property Funds Association, the Banking and Financial Services Law Association and holds a current practicing certificate from the NSW Law Society. 

Sarah Wiesener

Head of Legal, Risk and Compliance

Sarah is a lawyer with over 20 years’ experience in the financial services arena across a range of roles, structures and asset classes.

She is a Chartered Company Secretary and has acted as Company Secretary to a number of listed property funds.

Sarah has been head of compliance for a number of listed property funds. She has been a member of investment committees and provided support to audit, risk, and compliance committees as well as remuneration and nomination committees.

Sarah has experience in structuring complex capital markets transactions in domestic and overseas jurisdictions (primarily debt, securitisation and collaterised debt structures) and has worked closely with management on a number of fund management products for wholesale and retail investors.

Sarah holds a Bachelor of Laws from Bristol University (Honours) and holds a current NSW practising certificate.

Frank Tearle

Founder & Chief Executive Officer

Frank co-founded One Investment Group in 2009, and since December 2018 has acted as its chief executive officer. 

Before founding One Investment Group, Frank spent 6 years working at a structured finance and funds management business.  He held a variety roles including  General Counsel, a fund manager of two funds and interim head of the Hong Kong office. 

Prior to this corporate experience, Frank was a practicing lawyer with more than 10 years’ experience working in major law firms in Australia and the United Kingdom, specialising in mergers and acquisitions, capital markets, funds management and corporate governance. 

Frank has been a non-executive director of several companies, including the corporate manager of a Singapore listed property trust and an APRA regulated insurance company. 

Frank has a Masters in International Business Law from the University of Technology, Sydney and a Bachelor of Law (with Honours) from the University of Leicester.