The Assistant Treasurer and Minister for Superannuation and Financial Services, the Hon Bill Shorten MP, today released a discussion paper on the design and implementation details of the Government's new income tax system for managed investment trusts (MITs).
"This paper is one further step in the Government's plan to overhaul the taxation treatment of MITs and remove uncertainties," said the Assistant Treasurer.
"Once implemented, the Government's reforms will increase certainty for managed funds, reduce complexity and lower costs for MITs and their investors."
The Government announced the new tax system for MITs on 7 May 2010. The new system will benefit investors and trustees by removing longstanding uncertainty about the treatment of the income of MITs.
Key features of the new MIT tax system include:
- an elective 'attribution' system of taxation under which 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 'under' or 'over' distributions within a five per cent cap so that trusts are not required to reissue distribution statements and investors are not required to revisit tax returns; and
- removing double taxation that can arise in certain circumstances.
The changes are to have effect from 1 July 2011.
Two major features of the Government's new tax system for MITs have already been legislated. The trustee of a MIT can choose to apply the capital gains and losses (capital gains tax) regime to disposal of eligible assets. Also, a reduced rate of final withholding tax (of 7.5 per cent) applies to most foreign investors on fund payments from a MIT.
The consultation paper and further information about making a submission can be found on the Treasury website.
A further round of public consultation on exposure draft legislation and associated explanatory materials is planned for later this year. It is expected that legislation will be introduced into the Parliament in the first half of 2011.
Submissions are requested by Monday, 15 November 2010 (close of business).
18 October 2010