Review of the tax arrangements applying to managed investment trusts
On 29 October 2008, the Board of Taxation released its discussion paper on the Review of the tax arrangements applying to managed investment trusts. A copy of the discussion paper is available for download.
The Chairman of the Board of Taxation announced the release of the discussion paper via a press release.
The Board has developed this discussion paper to facilitate stakeholder consultation. In developing the discussion paper the Board has conducted targeted consultations with key stakeholders.
The Board welcomes submissions on issues raised in the discussion paper. The closing date for submissions is 19 December 2008. Submissions may be sent to:
| By Post: | Managed Investment Trusts Review The Board of Taxation c/- The Treasury Langton Crescent CANBERRA ACT 2600 |
| By email: | taxboard@treasury.gov.au |
| By facsimile | 02 6263 4471 |
To assist in the Review process, the Board conducted consultation meetings in November 2008. Consultation meetings were held on 12 November 2008 in Melbourne and 13 November 2008 in Sydney. The consultation meetings were attended by representatives from taxation professional bodies, major law and accounting firms, various major corporations and business associations. A copy of the consultation presentation is available for download.
Printed versions of the paper are available by email request sent to taxboard@treasury.gov.au, or by phoning the Board of Taxation Secretariat on (02) 6263 4366.
Background
On 22 February 2008 the Assistant Treasurer announced that he had asked the Board of Taxation to undertake a review of the tax arrangements applying to managed funds that operate as managed investment trusts.
The broad policy framework for the taxation of trusts is to tax the beneficiary on their share of the net income of the trust, so that the trustee is only taxed on income that is not taxable in the hands of the beneficiaries. Within this framework, the Board should ideally develop options for reform with taxation outcomes that are broadly consistent with five key policy principles:
- the tax treatment for trust beneficiaries who derive income from the trust should largely replicate the tax treatment for taxpayers as if they had derived the income directly;
- in recognition of the tax advantages available to trusts that are not available to companies deriving business income, flow through taxation of income from widely held trusts, such as managed investment trusts, should be limited to trusts undertaking activity that is primarily passive investment;
- beneficiaries should be assessable on their share of the net income of a trust whether it is paid or applied for their benefit, or they have a present right to call for immediate payment;
- the trustee should be liable to tax on the net income of the trust that is not assessable to beneficiaries in a particular income year; and
- trust losses should generally be trapped in the trust subject to limited special rules for their utilisation.
The objective of the review is to provide advice on options for introducing a specific tax regime for managed investment trusts which would reduce complexity, increase certainty and minimise compliance costs.
The Board has appointed a working group of its members comprising John Emerson AM (Chairman), Keith James, Chris Jordan AO and Dick Warburton AO to oversee the Board’s review of the tax arrangements applying to managed investment trusts.
The Board has been asked to provide a final report to the Government around the middle of 2009.
The Assistant Treasurer’s Press Release announcing the Board’s review and detailing the terms of reference for the review is available from the Assistant Treasurer’s website.
Further information on this review can be obtained from Jorge del Busto (02 6263 4365) at the Board of Taxation Secretariat.
