The New MIT Regime – Draft Legislation Released

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On 9 April 2015, the Assistant Treasurer released draft legislation for the new managed investment trust (MIT) tax regime.  The introduction of a separate MIT regime was first announced by the Federal government in 2010.

In the announcement accompanying the draft legislation, the Assistant Treasurer has stated that the new standalone regime is intended to “modernise the tax rules for eligible MITs whilst increasing certainty for both MITs and their investors”.  The regime is also intended to enhance the international competitiveness of Australian managed funds and promote the greater export of Australia’s funds management expertise.

The key features of the proposed new regime include:

  • An improved attribution model for distributing MIT income and tax liabilities to unitholders;
  • Enhanced certainty for taxpayers and MITs by allowing certain amounts to retain their tax character as they flow through to the MIT unitholders as well as in relation to the treatment of tax deferred distributions;
  • The ability to carry forward understatements/overstatements of taxable income;
  • The adoption of an overall simplified model of taxation, allowing deemed fixed trust treatment under the income tax law;
  • Greater certainty about the treatment of tax deferred distributions;
  • An expansion of the range of “good investors” for the purposes of establishing MIT status;
  • An expansion of the range of investors which have concessional treatment; and
  • The introduction of new rules allowing unitholders to challenge the trustee regarding the MIT’s tax allocation.

If enacted, the new regime will commence from 1 July 2015.

It is noted that whilst the draft legislation does go some way in improving the existing tax rules governing MIT’s, not all issues have been addressed, including the treatment of carry forward losses.  Such issues are likely to be raised during the public comment period, which is open until 23 April 2015.

Going forward, One Investment Group will be monitoring the progress of the draft legislation for the benefit of its existing and future clients.  It is however advised that eligible and affected MITs work closely with their Trustee’s and advisors to ensure the necessary administrative measures are undertaken, including a review of Deeds, Constitutions and relevant documentation as well as internal systems in light of the proposed draft legislation.

Click here to view the Assistant Treasurer’s announcement, including a link to the Draft Legislation and Explanatory Material.

One Investment Group acts as trustee and/or investment manager for numerous MITs for clients based in various jurisdictions. For all questions concerning MITs, please contact Justin Epstein on +612 8277 0000.