Stapled Structures Update – Further Government Consultation

Further to our news release earlier in March this year drawing clients’ attention to the Government’s release of a package of policy measures intended to address taxation bias towards foreign investors under certain stapled structures, Treasury has today released the next instalment of the package outlining the proposed conditions stapled entities must comply with to access the infrastructure concession and/or transitional arrangements.

The conditions include:

• The extension of existing integrity rules that apply to Managed Investment Trusts (MITs) to ensure that all staples are required to set their rent at arms’ length prices; and
• The introduction of statutory caps on the amount of cross-staple rent that is able to access the concessional rate of withholding tax (available under the MIT regime) for new and existing infrastructure projects during the transition or concession period.

The proposal paper provides some useful practical examples of how the new rules apply, along with a checklist setting out the steps for determining excess rent under the cross-staple rent cap principle.

The time line for consultation is particularly short given the closing date of 12 July, 2018, so Treasury has indicated that the preferred medium for submissions is electronic lodgement.

Just a reminder to clients or third parties intending to make a submission that legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the confidentiality of your submission.

The proposal paper can be accessed here.