Cheers greet proposed changes for managed investment trusts

Proposed changes to Australia’s managed investment trust regime have been met with cheers from the investment community as they welcome the boost in certainty and tax treatments.

The government revealed the long-awaited changes to Australia’s MIT tax system on Tuesday, and expects to create a new standalone regime that will apply from July 1.

Andrew Clements, partner at legal firm King & Wood Mallesons, said the new treatments may be “one of the single greatest tax reforms in the industry” since the introduction of capital gains tax.

“It will provide much greater flexibility in terms of the distribution of income and the allocation of tax liabilities to unit holders,” Mr Clements said. “It will allow much more flexibility to create new product opportunities.”

Some of the changes include expanding the range of “good investors” for establishing MIT status and extending the range of investors who will receive concessional treatment. The draft legislation also covers cost base adjustments to address double taxation issues, and more certainty around tax deferred distributions.

The government is now asking for feedback on the draft legislation.

Australia could see its financial services industry double in growth and compete on a more level playing field with Asia following the changes, says Alexis Kokkinos, tax partner at Pitcher Partners.

“The release of the managed investment trust rules will not only address uncertainty in our taxation regime for managed funds, but has the potential to also support the creation of innovative funds in Australia, such as peer-to-peer multi class funds,” he said.

Australia’s taxation regime for funds management is heavily geared at the domestic superannuation economy. “We need to be more attractive and competitive in the Asian region,” he argued.

Investment and tax experts say the new regime is complex and would require large system and process changes. But they argue that the changes will be worth it, as they improve the ease of doing business and access to MITs.

Andrew Mihno, executive director of international and capital markets at the Property Council of Australia, said the changes would cement the country as a “top tier” destination for global real estate investment capital.

“This reform is critically important because about 12 million Australians are investors in property trusts, either directly or indirectly through their retirement savings,” he argued.

“A healthy funds management industry needs a clear and globally competitive tax regime to attract international capital.”