MIT tax regime to commence from 1 July 2011

On Friday 7 May 2010, the Assistant Treasurer Nick Sherry announced the Government’s position in relation to the Board of Taxation’s (the Board) review of the tax arrangements applying to managed investment trusts (MIT).

At the same time, the Government released the Board’s position paper.  Ultimately, the Board made 48 recommendations and the Assistant Treasurer announced that the “Government is accepting 38 of the Board’s 48 recommendations” and “will put in place a new tax system for Managed Investment Trusts for commencement on 1 July 2011.”

The key features of the new MIT tax system as announced by the Assistant Treasurer on Friday are:

  •  the provision of an elective “attribution” system of taxation to replace the present entitlement system of Division 6 of the Income Tax Assessment Act 1936
  • this new attribution system will provide that investors will be taxed only on the income that the trustee allocates to them on a fair and reasonable basis, consistent with their entitlements under the trust deed or the trust’s constituent documents
  • establishing the ability to deal with “over or under” distributions within a five per cent cap so that trusts are not required to reissue statements and investors are not required to revisit tax returns
  • removing double taxation and
  • abolishing Division 6B of the Income Tax Assessment Act 1936 which relates to corporate unit trusts and which the Board found redundant.

The Government will consult with industry on the implementation of these reforms which follow on from our Update of 1 April 2010 “Managed Investment Trust Capital Election“.

The Hall & Wilcox Taxation and Financial Services teams will be running a series of roundtable discussions on the new rules with Hall & Wilcox partner and Board of Taxation representative, Keith James providing key comments and insights into the design of the new rules.


You might be also interested in...

Financial Services | 1 Apr 2010

Managed Investment Trust Capital Election

The Tax Laws Amendment (2010 Measures No.1) Bill 2010 is currently before the Senate. This Bill introduces some important changes to the Income Tax Assessment Act 1997 (the 1997 Act) to allow eligible Australian managed investment trusts (MIT) to make an irrevocable election to apply the capital gains tax provisions as the primary code for the taxation of gains and losses on the disposal of certain assets held as passive investments (primarily shares, units and real property).

Financial Services | 22 Jun 2010

New Corporations Regulation – Instalment Warrants are financial products

The Minister for Financial Services, Superannuation and Corporate Law has released draft regulations that will amend the Corporations Regulations to provide that: