The Government has decided to amend the income tax law (effective from 1 July 1998) to provide Capital Gains Tax (CGT) rollover relief for changes to the structure of managed investment funds that will be required under the terms of the Managed Investments Act 1998 (MIA) which recently passed the Parliament.
The MIA will make important changes to the regulation of managed investment funds to ensure greater accountability of fund managers to their investors. Central to the new arrangements will be the appointment of a single responsible entity accountable to investors for the management of their funds. This is to replace the existing arrangement of a two tier structure comprising a management company and independent trustee.
Under the new arrangements, either the management company or trustee can choose to become the single responsible entity. There is to be a two year transition period beginning on 1 July 1998 for the funds to restructure.
Managed funds will be eligible for CGT rollover relief where the following requirements are met:
- the managed investment scheme already exists when the new arrangements begin on 1 July 1998;
- the transfer of the schemes property from the trustee to the single responsible entity (or custodian) takes place in accordance with the transitional arrangements in the MIA; and
- there is no change in the underlying ownership of the scheme property.
CGT rollover relief will ensure that a capital gain or capital loss is disregarded where it results from changes necessary for compliance with the MIA. It will also ensure that a managed funds pre-CGT assets keep that status.
CANBERRA
28 July 1998
Contact:
Penny Farnsworth (Assistant Treasurers office)
(02) 62777360
John Burge (ATO)
(02) 62161324 or (014) 635731