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Australia Consults On New MIT Tax System

Tuesday, October 19, 2010

Australia’s Assistant Treasurer and Minister for Superannuation and Financial Services, Bill Shorten, has released a discussion paper on the design and implementation details of the government's new income tax system for managed investment trusts (MITs).

"This paper is one further step in the government's plan to overhaul the taxation treatment of MITs and remove uncertainties," said the Assistant Treasurer. "Once implemented, the government's reforms will increase certainty for managed funds, reduce complexity and lower costs for MITs and their investors."

Broadly, MITs are collective investment trusts that are listed, widely held or held by certain collective investment entities. Australian resident retail and wholesale unit trusts are both eligible to be an MIT.

Key features of the new MIT tax system include an elective 'attribution' system of taxation (in lieu of the present entitlement to income method), under which investors will be taxed only on the income that the trustee allocates to them on a fair and reasonable basis, consistent with their entitlements under the trust deed or the trust's constituent documents.

It will also establish the ability to deal with 'under' or 'over' distributions within a 5% cap so that trusts are not required to reissue distribution statements and investors are not required to revisit tax returns; and MIT unit holders will be able to make, in certain circumstances, upward adjustments to the cost base of their unit holdings to reduce the extent to which double taxation might otherwise arise. In addition, MITs will be treated as fixed trusts for various taxation law purposes, such as the trust loss rules.

Two major features of the government's new tax system for MITs have already been legislated. The trustee of a MIT can choose to apply the capital gains and losses regime to the disposal of eligible assets. Also, a reduced rate of final withholding tax (of 7.5%) applies to most foreign investors on fund payments from an MIT.

A substantial proportion of the investment management activities carried out in relation to the trust in respect of Australian assets under management should be undertaken in Australia, in order to attract the withholding tax concession. This is not necessary for capital account treatment.

The government announced the new tax system for MITs in May this year, and its changes are to have effect from July 1, 2011.

Submissions on the discussion paper are requested by November 15, 2010. A further round of public consultation on exposure draft legislation and associated explanatory materials is planned for later this year. It is expected that legislation will be introduced into the Parliament in the first half of 2011.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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