Certain corporate unit trusts and public trading trusts are to be permitted to head consolidated groups under legislation announced today by the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan.
Corporate unit trusts and public trading trusts are trusts that are held by a variety of investors and whose units are listed on a stock exchange. These trusts provide investment capital to fund infrastructure projects such as pipelines, water filtration plants, roads etc. These trusts generally seek investment from the wider community and generally guarantee a particular rate of return on those investments.
Senator Coonan said these trusts are currently taxed like companies in many respects.
"Those trusts that elect to head consolidated groups when the legislation takes effect on July 1 2002 will be taxed the same as companies in all respects, wherever possible. Those trusts that elect to head consolidated groups will therefore need to make a once and for all election to be taxed like companies," Senator Coonan said.
"In keeping with the underlying principle of the consolidation regime -that entities that are taxed as companies should be able to head consolidated groups - it is appropriate that those corporate unit trusts and public trading trusts that elect to be taxed like companies should be able to head consolidated groups," Senator Coonan said.
Prior to this announcement, corporate unit trusts and public trading trusts could not head a consolidated group. This was because their tax treatment was not identical, in all respects, to that of ordinary resident companies.
"Enabling certain corporate unit trusts and public trading trusts to head a consolidated group will ensure that these entities are not disadvantaged by the removal of the inter-corporate dividend rebate and certain grouping benefits as a result of the introduction of the consolidation regime," Senator Coonan said.
The trusts that will be eligible to head consolidated groups will be those that are subject to Divisions 6B and 6C of Part III of the Income Tax Assessment Act 1936.
"Trusts that either cannot, or choose not to, head consolidated groups will continue to be taxed as the law currently stands. However, once a trust chooses to head a consolidated group it will continue to be taxed like a company even if the group it heads de-consolidates," Senator Coonan explained.
Senator Coonan said legislation to give effect to this measure would be introduced as soon as practicable.