The Assistant Treasurer, Senator Nick Sherry, has today announced an expansion of the definition of a managed investment trust (MIT) in relation to the withholding tax rules.
This follows the introduction into Parliament today of a wider-reaching and more effective final form of the Rudd Government's measure to allow MITs to elect to have the capital gains tax regime as the primary code for taxing gains and losses on the disposal of key investments.
The expansion of the definition of a MIT in relation to the withholding tax rules will ensure closer alignment of the withholding tax definition with the extended definition of a MIT contained in the capital election reforms.
"These changes will provide greater certainty as to the operation of the MIT withholding tax rules, that have applied from 1 July 2008, and will enhance the competitiveness of the Australian managed funds industry in attracting future foreign investment", the Assistant Treasurer said.
"The Rudd Government is committed to a robust, stable and certain tax regime for managed investment trusts."
"This important definitional expansion directly compliments the wider measure on capital account election we have finalised and introduced into the Parliament today."
To achieve closer alignment, the MIT withholding tax definition will be extended to include both wholesale managed investment schemes and government-owned managed investment schemes, subject to appropriate integrity rules.
The changes will also amend the MIT withholding tax definition to introduce a trading business test for trusts that would otherwise qualify as a MIT and will clarify the operation of the definition where there is only one member.
Numerous submissions on the draft capital election Bill called for a closer alignment of the definitions of a MIT for the capital account treatment and for the withholding tax rules.
The proposed changes will have effect in relation to certain distributions from MITs made in relation to the period commencing from 1 July 2010.
The Government will consult with relevant industry representatives in developing the changes required to achieve closer alignment of the MIT definitions.