Treasury has invited submissions on the draft AMIT Technical Amendments Bill (draft Bill) and explanatory materials (explanatory materials) to assist them in their objective to ensure that the new tax system for MITs operates as intended. These amendments were foreshadowed almost a year ago (19 July 2017) by the Hon Kelly O’Dwyer MP, Minister for Revenue and Financial Services http://kmo.ministers.treasury.gov.au/ who stated that “The attribution tax regime was designed to give greater certainty to investors in managed funds, reduce compliance costs for the funds and enhance overall the competitiveness of Australia’s funds management industry”.
While such lofty ideals are admirable, the devil, as they say, is in the detail, with the Bill released this week (18 June 2018) not disappointing taxpayers in this context. As to whether the “…the amendments will clarify the law, providing industry with increased investment certainty” as Minister O’Dwyer also asserted, remains to be seen.
While the amendments are a step in the right direction in terms of enhancing the practical operation of the regime, there is still some work to do to iron out remaining issues impacting taxpayers.
CGT amendments head up the key changes as follows:
While the above amendments are designed to address outstanding practical issues, there are still some matters that will hopefully be picked up and remedied in the consultation process.
Such matters include the lack of any substantive change to undistributed CGT concession amounts of an MIT, which becomes an AMIT. Such amounts can currently be distributed to unitholders without a cost base adjustment if the MIT stays outside the AMIT regime, but if within it, and an amount is distributed, a cost base adjustment is required. The practical end result is that some MITs will be forced to stay outside the AMIT regime to preserve this benefit. We feel this is an unintended consequence that will need to be re-visited and re-worked.
There is also a related issue where the unitholders cost base determined by the net income attributed to the unitholder, is increased, but also decreased by distributions to that unitholder, where relevant adjustments are often attributed to different years of income.
Finally, the need for a reconciliation of the AMIT regime with broader ATO CGT provisions, including an explanation of how existing CGT concessions applying to a trust (CGT event 4), align with CGT event 10, which sets out a different (but commercially equivalent) CGT event, is required, given the level of uncertainty created as to whether the concessions are available to an AMIT.
We remain confident Treasury will continue to be receptive to public submissions arising from the consultation which ends on 18 July 2018.
One Investment Group will continue to engage with government and industry bodies, to ensure the best outcome for our client’s and the managed funds industry more broadly.