The Government has released for consultation an Exposure Draft of the Treasury Laws Amendment (2018 Measures No. 5) Bill 2018: AMIT Technical Amendments, more commonly referred to as the “AMIT Fix-up Bill”.
With consultation ending on 16 July 2018, the Bill will not be in force in time for 30 June 2018 year end distributions, notwithstanding that the measures are stated as having application for that income year. For many funds, 30 June 2018 represents the first full year of Attribution Managed Investment Trusts (AMIT), which has required significant changes to core systems that would not necessarily have incorporated all of the proposed amendments.
The amendments, announced in a press release by the Minister for Revenue and Financial Services on 19 July 2017, will see:
- Changes to the AMIT eligibility rules to clarify that wholly owned Managed Investment Trusts (MIT) held by widely held entities are entitled to enter the AMIT regime. This change will be particularly welcomed by superannuation funds which often use wholly owned MITs as investment vehicles for significant assets or portfolios.
- Changes in the calculation of rounding adjustments and trustee shortfall tax to ensure consistency, especially in the treatment of discount capital gains.
- Further changes to the capital gains tax (CGT) rules to align the cost base adjustment outcomes between MITs and AMITs.
- Modifications to the method statement for determining the amount of a fund payment, to ensure that capital losses from non-taxable Australian real property (which are not subject to MIT withholding) are not applied to reduce capital gains from Taxable Australian Real Property (which are subject to MIT withholding). Practically, the introduction of these measures will create significant operational issues for fund managers and their custodians if enacted in the current form.
- Some clarity in relation to the MIT withholding rules and no tax file number (TFN) withholding rules as they apply to deemed payments, which is broadly consistent with previously published guidance from the Australian Taxation Office (ATO). The clarity is provided by way of notes to the relevant provisions confirming the application to deemed payments from AMITs, although no further clarity has been provided as to the correct base amount on which to withhold (eg, net or gross of tax credits, etc).
- Clarification that former public trading trusts and corporate unit trusts which ceased to be treated as such on 1 July 2016 are able to distribute all of their franking credits (importantly, the window for distributing these franking credits ends on 30 June 2018 so any remaining franking credits need to be distributed by then or they will be lost).
- Finally, the AMIT transitional rules will be updated to ensure that early-balancing trusts can enter the AMIT regime appropriately.
We welcome the clarity provided by these developments and appreciate the opportunity provided by the Government to submit comments. Given the importance of the technical amendments, and the extent of work involved in upgrading systems to accommodate such changes, we would strongly recommend that some provisions apply prospectively from the date of enactment (after detailed consultation).