Gotta get ourselves collective… | KPMG | AU
close
Share with your friends

Gotta get ourselves collective…

Gotta get ourselves collective…

Natalie Raju and Jamie Levy discuss the merits of the Federal Government's proposed corporate collective investment vehicle (CCIV) regime.

1000

Also on KPMG.com

Business people collaborating

The Stereo MCs, who had a strong following in their day, were going to get connected. Nowadays, with the Federal Government's proposed corporate collective investment vehicle (CCIV) regime we are going to get collective instead.

Australia’s ability to attract foreign investment has for many years been sub-optimal due to the reluctance of certain overseas investors to put their money into trust structures.The CCIV regime would create an alternative for Australian investment outside of traditional trust structures. This has the potential to improve the international competitiveness of Australian fund managers, and to simplify some inbound Australian investment structures. Exposure draft legislation was released in late August 2017 for public comment.

However, it is unclear how extensively the CCIV will be used, unless its features allow it to:

  • be attractive when compared with overseas managed investment offerings. Key to this are both simplicity of operation and cost-competitiveness
  • provide commercial advantages when compared to the existing Australian managed investment scheme (MIS) regimes. In particular, a clearly-defined and low-cost migration path from MIS to CCIV will be critical to the success of the vehicle.

Certain features of the proposed wholesale CCIV regime (including, for example, the requirement for the corporate director to be an Australian public company that is registered as a CCIV and that is subject to restrictions that the trustee of a wholesale MIS is not subject to) would present additional cost and complexity compared to the current requirements for a wholesale MIS.

For a retail fund, the requirement to have a separate and independent depositary entity with supervisory responsibilities, in addition to the corporate director, would again impose a risk of additional costs compared to the structures currently in use.

KPMG’s submission on the exposure draft included the following recommendations for inclusion in the Bill when it is introduced to Parliament:

  • Include clear guidance on what steps are required in order to transition from an MIS to a CCIV.
  • The tax legislation should allow a capital gains tax (CGT) rollover on transitioning from MIS to CCIV.
  • A CCIV should be allowed to distribute surplus cash flow on a ‘tax-deferred’ basis in the same way as an MIS is able to.
  • Ensure that a sub-fund of a CCIV is protected from creditors of any other sub-fund of the same CCIV, in the event that any of those other sub-funds become insolvent. 
  • Commitment to a post-implementation review of the effectiveness of the CCIV within two years of the legislation entering into force.
  • Proceed promptly with the implementation of the proposed limited partnership CIV regime, in parallel with the CCIV process.
  • Modify the test for depositary’s independence such that the sole requirement is for it to have a minimum number of independent directors.
  • Retail investments in the CCIV by employees of the corporate director or of the investment manager should not cause the CCIV to be classified as retail.
  • Delete the requirement for the corporate director of a wholesale CCIV to be a public company, and ensure that registration as a CCIV is a component of the corporate director incorporation process.
     

Connect with us

 

Request for proposal

 

Submit