The Assistant Treasurer, Senator Rod Kemp, today announced that the Government will be introducing transitional amendments to ensure that certain investors that hold assets through more than one trust (ie through a chain of trusts), are treated comparably with investors investing through one trust in relation to the 50 percent capital gains tax (CGT) discount. It is common for amounts to pass through more than one trust in the funds management industry, as retail funds often invest in wholesale funds.
Without the proposed amendments, before 1 July 2001 the CGT laws reduce the benefit of the 50 percent CGT discount where associated amounts are distributed at each level through a chain of trusts where fixed interests are held at each level in the chain. Under the proposed amendments, where:
• a non-assessable amount attributable to the 50 percent CGT discount has been paid to a trustee on or after 11:45am on 21 September 1999 and before 1 July 2001; and
• the amount is paid to the trustee in respect of a unit or interest in a fixed trust; and
• the interest has not been disposed of by the trustee before 1 July 2001,
then the payment of the amount will not cause a cost base adjustment under CGT event E4. From 1 July 2001, previously announced measures that allow investors who invest through trusts to fully benefit from the 50 percent CGT discount will mean these transitional measures will no longer be required.
The previously announced measures have the effect that for payments from 1 July 2001, cost base adjustments will not be required for distributions from the 50 percent CGT discount, though from 1 July 2001 an adjustment will need to be made on payments of any non-assessable amounts associated with building allowances.
CANBERRA
31 July 2001
Contact:
Media Unit Australian Taxation Office (02) 6216 1901
Jacob Eaton Treasury (02) 6263 4384
Richard Wise Assistant Treasurer's Office (02) 6277 7360