Archive for the ‘News’ Category
2012 FEDERAL BUDGET IMPACT – FOR MANAGED INVESTMENT TRUSTS
In an unexpected move, the Federal Government has announced in its 2012 Budget that the managed investment trust ("MIT") withholding tax rate would be increased from 7.5% to 15% with effect from 1 July 2012. Currently, the 7.5% rate is available for fund payments made by a MIT to a foreign entity resident in an exchange of information country. The decision to increase the MIT withholding rate is expected to generate savings of $260 million, however the extent to which this will affect the level of foreign investment into Australia is unclear. The Budget announcement did not provide details as to how the rate increase will be transitioned, that is, whether the new rate would apply to distributions made after 1 July 2012, or those made in respect of income earned in the year starting 1 July 2012. Further, there is no mention of grandfathering the withholding rate in relation to arrangements signed in reliance of the 7.5% rate. When the MIT rules were first introduced in July 2011, they were intended to facilitate Australia as a financial hub and reduce any tax disadvantage to foreign investment into Australia. However, with this annoucement, it is clear that the increased rate will negatively impact ...
New Fund Launch – KPI Global Fund
28 March 2012 – One Investment Group is pleased to announce the launch of the KPI Global Fund.
New Fund Launch – Benlee Property Trust No 5
28 March 2012 – One Investment Group is pleased to announce the launch of the Benlee Property Trust No 5.
ATO Draft Ruling – The Meaning of Income for Trust Tax Law purposes
On 28 March 2012, the ATO released draft tax ruling, TR 2012/D1, outlining the ATO’s view on the meaning of ‘income’ for trust tax purposes. The draft ruling comes after a number of recent cases and legislative changes forming part of the broader reform of trust tax law in Australia. The draft ruling outlines the ATO’s view on the taxation of trusts based on three broad principles: The income of the trust must be measured in respect of distinct years of income; The income of the trust is a product of the trust estate, representing an increase, separate to the trust estate (compared to the preceding income year); and The income of the trust must be an amount in respect of which a beneficiary can be made presently entitled. In broad terms, the current wording of the draft ruling appears to suggest that a trust’s deed has a limited role in respect of the tax rules and the taxation outcomes for trustees and beneficiaries. That is, the income of the trust estate represents an actual net accretion to the trust estate over a the relevant income year. In summary, the ATO’s position does cast doubt on, ...
FoFA Bills passed by the House of Representatives
On 22 March 2012, the progress of the FoFA legislation continued when two bills were passed in the House of Representatives. A number of provisions have been amended following feedback from relevant stakeholders. For example, a new exception to the “opt-in rules” has been introduced. As a result, financial planners who are members of a professional body with an approved code of conduct will not be required to comply with the “opt-in rules”, which for other advisers will require them to sign fresh agreements with their clients every 2 years. It should be noted that the bills do not include the deferral of the date for mandatory compliance with the FoFA measures from 1 July 2012 to 1 July 2013. Deferral is expected to occur by amendments in the Senate or by separate legislation.
ATO Acknowledges Transparency of Certain Bare Trust Arrangements as Administrative Concession
The ATO has recently taken an administrative position regarding the income tax treatment of certain custodial and nominee arrangements. The announcement, which is contained in a decision impact statement, refers specifically to trust arrangements commonly recognised as “bare trusts”. The ATO has stated that such arrangements will be ignored for Australian income tax purposes, thus avoiding the need to lodge trust tax returns and apply the specific trust taxing provisions under tax laws. The ATO’s position effectively aligns the Australian tax law with industry practice, that is, ignoring such arrangements for tax purposes. The announcement, although not binding on the ATO, should provide some level of comfort for taxpayers and particularly those businesses that offer nominee, custodial and bare trust services. However, it is advised that such arrangements be reviewed in light of the relevant fiduciary obligations and the Australian trust tax law provisions.
Government delays the implementation of the Future of Financial Advice changes until 1 July, 2013
Bill Shorten, Minister for Financial Services, has delayed the commencement of FOFA so as to provide “more flexible commencement arrangements”. It was announced today that the reforms would commence from 1 July 2012, but applications of the provisions would be voluntary until a year later, with mandatory application starting from the 1 July, 2013.
Investment Manager Regime – Second Exposure Draft Legislation Released
On 7 March 2012, the Government released a second exposure draft legislation in relation to the Investor Manager Regime (IMR). The draft legislation deals specifically with the first two elements of the IMR previously announced, namely, the Fin 48 Exemption and the Interim IMR. Amendments under the draft legislation are intended to directly affect IMR foreign funds and non-resident investors by providing certainty surrounding the US standard, Fin 48, and preventing Australian taxation for those foreign funds deemed to have a Permanent Establishment (PE) where they engage Australian based intermediaries. The Fin 48 Exemption The proposed Fin 48 Exemption applies to exempt all income, gains or losses from portfolio investments (interests less than 10%) and eligible financial arrangements to the foreign fund and its non-resident investors. This Exemption is proposed to apply to the 2010-2011 income year and prior years. The Interim IMR The Interim IMR is intended to ensure widely-held foreign resident funds are not subject to Australian taxation where the fund is taken to have an Australian PE by virtue of the fact that it engages the services of an Australian based intermediary. The Interim IMR is proposed to apply to ...
Australia’s Investment Manager Regime – Third and Final Element of Changes Announced
On 16 December 2011, the Federal Government announced the implementation of the third and final element of the Investment Manager Regime (IMR), which, once enacted will apply retrospectively from 1 July 2011. The proposed IMR changes are intended to remove a major export barrier for Australian-based fund managers, and align the Australian tax treatment of passive portfolio investments with international standards. In the announcement, the Minister for Financial Services and Superannuation, Bill Shorten stated that "the IMR will provide certainty of tax treatment for the funds management sector, which in Australia has $1.8 trillion of funds under management - $61 billion of which comes from offshore, and will further enhance Australia as a financial services centre in the Asia Pacific region." Both Government and the Australian investment management industry have high expectations for the IMR changes to attract more foreign capital and further promote the domestic managed funds industry. The changes to be implemented under the third IMR element include: Foreign managed funds and non-resident investors will be exempt from Australian taxation in relation to their Australian sourced income and gains/losses derived from portfolio interests (being less than 10%) or financial arrangements.
Consultation Paper – Modernising the Taxation of Trust Income
On 21 November 2011, the Government released a consultation paper relating to the broader reforms for the taxation of trusts in Australia. The Consultation paper is directed at updating and rewriting the trust income tax rules to increase certainty and reduce compliance costs for the many hundreds of thousands of taxpayers that use trust structures. The key points from the consultation paper include: Managed Investment Trusts (MITs) will not be subject to the review, as they are dealt with separately under specific MIT tax provisions Issues relating specifically to Fixed Trusts are not addressed in detail (it is expected that the Government will provide further comment on fixed trusts separately.) The Government’s target start date for the trust reforms is expected to be from 1 July 2013 The reforms are directed at providing greater certainty to taxpayers in relation to the character flow-through and streaming aspects of trusts as well as determining the allocation of expenses within the trust The possibility of allowing an extended period for determining beneficiary entitlements for tax purposes The paper also outlined three key alternative options for reforming the trust provisions, including: i. Retaining the existing rules and rectifying specific errors, such ...
ASIC seeks to improve prospectus disclosure
ASIC has released new guidance for issuers of disclosure documents, to assist them in producing documents which are “clear, concise and effective”. The guidance is contained in Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors. As a regular issuer of offer documents, One Investment Group welcomes the release of RG228 and the guidance and assistance it will provide to drafting and preparing quality disclosure documents. RG228 is primarily concerned with disclosure relating to prospectuses issued under section 708 of the Corporations Act. However, ASIC has stated that the guidance may, in certain circumstances, also be relevant to other documents such as bidder’s statements under takeovers, short form prospectuses and product disclosure statements. Specific areas covered by RG228 include: Clear, concise and effective: drafting tips are provided, e.g. avoid double negatives, use verbs rather than nouns, avoid overusing definitions or defining commonly understood terms, use navigation aids to assist readers to locate and identify information in the document and include information in a logical order. Investment overview: ASIC emphasises the need to have a clear, concise and effective investment overview, which provides a meaningful summary of information that is key to a retail investor’s investment decision and provides a balanced disclosure of the ...
New capital requirements for Responsible Entities
On 7 November 2011, ASIC released details of new financial requirements for responsible entities of registered managed investment schemes. Whilst the changes introduce more onerous financial requirements than the current requirements, One Investment Group welcomes the changes as we believe they provide greater investor confidence and improve the integrity of the registered managed investment scheme market. These new requirements will come into effect next year on 1 November 2012, and are the first changes since the current financial requirements were introduced in 2002. Why do we need the changes? The changes were deemed to be required because of: the substantial increase in the amount of assets managed by responsible entities; a significant growth in the number of registered managed investment schemes; the diversification in the size, complexity and nature of the types of schemes; and a number of recent high-profile collapses of responsible entities where arguably the level of financial resources held by the responsible entity has made it difficult for the schemes to be wound up in an orderly fashion. What are ASIC’s objectives? ASIC hopes that the changes will assist in ensuring that for responsible entities of registered managed investments schemes: there are arrangements to meet operating costs throughout the life of their schemes; there is some level ...
Proposals to tighten financial product advertising
5 September 2011 - On 30 August 2011, ASIC issued a consultation paper seeking feedback on proposals to tighten the rules governing the advertising of financial products. The proposals provide product issuers with more specific guidance as to the content and form of advertisements and are likely to have a material impact on the way in which financial products are advertised in the future. ASIC’s proposals are contained in Consultation Paper 167 – Advertising financial products and advice services: Good practice guidance. Comments to ASIC on the proposals are required to be submitted by 25 October 2011. ASIC’s proposals are a response to the increasingly complex environment in which investors operate and the fact it believes many investors struggle to understand the structure and associated risks of the more complex financial products that are available. ASIC is concerned to ensure that advertisements are balanced so that investors make decisions that are appropriate for them. The proposals are far-reaching and apply to all types of financial products including: investment products; risk products; non-cash payment facilities; and credit facilities. ASIC expects that: all advertisements will present a balanced view of the risks and benefits of the particular product that is being advertised; claims made will be consistent with relevant disclosure documents; images will not ...
New Fund Launch – Litigation Claim Unit Trust
1 September 2011 - One Investment Group is pleased to announce the launch of the Litigation Claim Unit Trust.
New Role – Litigation Claim Rights
1 September 2011 - One Investment Group is pleased to announce that it has been engaged to act as Collection Agent.
Interim investment management regime and FIN 48 solution for foreign funds announced
16 August 2011 - On 16 August 2011, the Government released exposure draft legislation seeking to address two key measures relevant to foreign funds and their Australian based intermediaries. The first measure relates to the application of US accounting standard 'FIN 48' and US-based fund managers investing in Australia. Under recent changes to FIN 48, foreign funds may become retrospectively exposed to Australian taxation in respect of certain investment income with an uncertain tax position. The exposure draft seeks to amend the tax treatment of such foreign Investment Manager Regime funds by effectively exempting such income from Australian tax. If enacted, the exposure draft will have retrospective effect and apply for the 2010-11 and prior income years. The second measure relates to the Australian tax treatment of certain investment income of foreign funds where those funds are taken to have a permanent establishment in Australia. Under the exposure draft, the income of a foreign Investment Manager Regime fund which would otherwise be taxable in Australia by virtue of the fact that the foreign fund engages a domestic investment manager and is treated as having a 'permanent establishment' in Australia will be exempt. The exemption, if enacted will apply to the 2011-12 and ...
New Exposure Draft of Amendments to Clarify Taxation of Trusts Released – MIT Carve out Welcomed
07 June 2011 - On 2 June 2011 the Government released draft legislation aimed at reforming the taxation of trusts in Australia and simplifying the proposed new streaming provisions. The draft legislation amends the Government’s previous releases and draft legislation aimed at limiting the ability of Trusts to stream capital gains and franking credits. The 2 June 2011 amendments are intended to provide interim reforms for the taxation of trusts whilst the Government continues its broader rewrite of the existing trust provisions. The 2 June 2011 draft legislation still limits the streaming of capital gains and franked dividends to particular beneficiaries subject to the particular beneficiary being ‘specifically entitled’ to that capital gain/dividend. Similarly, where no beneficiary is ‘specifically entitled’ to an amount of capital gain/dividend income, the income will be allocated amongst all beneficiaries under the Proportionate Approach. The key amendment under the draft legislation relates to a specific carve out for managed investment trusts (MITs) who can elect not to apply the new streaming rules for the 2010-11 and 2011-12 income years. The election must be made by the later of the end of the relevant year of income and two months from the commencement of the proposed amendments. MITs are also ...
Exposure Draft of Amendments to Clarify Taxation of Trusts Released
20 April 2011 - In April 2011, the Treasury released draft legislation directed at reforming the taxation of Trusts in Australia. The draft legislation, which has been described as interim, is intended to increase certainty for trustees, fund managers, investors and beneficiaries in relation to streaming capital gains and franked distributions through trust structures. One of the key reforms in the draft legislation is the recognition that capital gains and franked dividends can be streamed to particular beneficiaries, as per the Quantum Approach. This ability to stream capital gains and dividends is however limited by the requirement that the particular beneficiary is ‘specifically entitled’ to that capital gain/dividend. Where no beneficiary is ‘specifically entitled’ to an amount of capital gain/dividend income, the income will be allocated amongst all beneficiaries under the Proportionate Approach. Whether a beneficiary is ‘specifically entitled’ is dependent on the terms of the relevant Trust Deed and the records of the trust (distribution statements, accounts etc.). As such trustees and managers are advised to review their Trust Deeds and ensure all allocations in a timely manner prior to 30 June where streaming is required. The draft legislation also provides guidance as to the application of trust expenses, (to be applied ...
ASIC invites feedback on proposals to improve disclosure for hedge funds
24 February 2011 - ASIC has released a consultation paper that outlines proposals to improve disclosure requirements for retail investors who invest in hedge funds. Consultation Paper 147 Hedge funds: Improving Disclosure for retail investors seeks feedback on enhancements aimed at ensuring retail investors and their advisers have the information they need to make an informed investment decision about the risks posed by hedge funds. ASIC Commissioner, Greg Medcraft said, ‘Hedge funds, because of their diverse investment strategies, complex structures and use of leverage, short selling and derivatives can pose more diverse and complex risks for investors than traditional funds. Investors need the knowledge to assess factors such as how their money is to be invested, who makes key decisions for the fund, how the assets will be valued, and how investors can withdraw their money as well as details relating to leveraging, derivatives and short selling.’ As part of this consultation, ASIC is also seeking feedback on how the proposed disclosure guidance will interact with the tailored Product Disclosure Statement requirements for simple managed investment schemes. Comments on the consultation paper are due by Thursday 21 April 2011.
Opportunities for investment in foreign funds by Australian residents
18 February 2011 – The Assistant Treasurer has recently released Exposure Draft legislation for the proposed Foreign Accumulation Fund (“FAF”) rules – intended to replace the repealed Foreign Investment Fund (“FIF”) rules as well as the proposed rewrite of the Controlled Foreign Company (“CFC”) rules. The release of the Exposure Drafts is welcoming news to both: Australian investors investing in foreign funds or foreign companies; and Foreign fund managers seeking to offer their products to Australian retail and wholesale investors, including superannuation funds. The proposed new rules for FAFs and CFCs are intended to remove some of the existing tax barriers that have deterred Australian outbound investment. A copy of the exposure drafts is available at Exposure Draft – Reform of the foreign source income deferral rules Industry and public submissions will be accepted by Treasury before the closing date, 18 March 2011.
Government releases options paper on review of retail/wholesale distinction
7 February 2011 - The Australian Federal Government has released a consultation paper on the distinction between retail and wholesale clients in the Corporations Act 2001. This is timely and long overdue, given the increase in Financial Service providers looking to offer financial products aimed at high net worth or “sophisticated investors”. Whilst the protection offered to mum and dad, “retail”, investors is constantly being enhanced (see below), wholesale clients do not receive the same level of disclosure and protection as they are considered to be better informed, and better able to assess the risks involved. The consultation paper proposes various options for reform including: Radically removing the distinction between retail and wholesale clients altogether, resulting in all investors receiving the same level of protection and disclosure; Introducing a subjective “sophisticated investor” test which would allow financial services providers to determine whether the client is ‘sophisticated’ based on their financial literacy; and Introducing various other changes, such as increasing income threshold amounts, additional requirements for complex products and potentially even removing the “sophisticated investor” concept altogether from section 761GA of the Corporations Act given the proposed increased wealth threshold test.
Last Man Standing Issue
19 January 2011 – Following the release of the Federal Courts judgment in Colonial First State Investments Limited v Commissioner of Taxation, (“Colonial First State case”) Trustees and investors can gain further understanding around the taxation treatment of trust distributions and the limitations of the trust deed. In the Colonial First State case, the Court held that a “last man standing” (or distribution) clause was ineffective for tax purposes as a means of allocating tax liability to redeeming investors throughout the tax year. “Last man standing” clauses are generally intended to equalise the tax exposure for both redeeming and continuing unitholders over the life of a trust and prevent continuing unitholders bearing a disproportionate share of the trust’s tax liability. Trustees and Managers must be cautious going forward to ensure that trust distributions reflect an allocation of the trust’s taxable income and that any existing “last man standing” type clauses are reviewed. Industry bodies are currently lobbying the Australian Government to address these trust issues (redemptions and “last man standing” inequalities) through changes to the tax law. Whether and how the Government intends to address these issues remains unclear, however, it is expected that such changes could be done either by ...
New Exemption for Foreign-Based Funds Announced
19 January 2011 – The Assistant Treasurer has announced a new exemption for relevant investment income derived by foreign-based funds investing in Australia via Australian fund managers. The exemption is intended to increase the inflow of foreign funds into Australia and encourage foreign investment through Australian fund managers. The exemption will apply to the 2010-2011 and later income years and enable investment returns (income and gains) to flow back to foreign investors free of Australian tax. The exemption will apply to specified investments, including portfolio interests in companies and trusts, certain bonds and other financial interests such as derivatives. The exemption is designed to address the situation where a foreign managed fund is taken to have a permanent establishment in Australia because of an Australian intermediary that is a dependent, branch or subsidiary of the foreign fund. This is welcoming news for Australian fund managers as it means that it more likely that foreign based funds will use Australian based fund managers. The exemption is a positive step in Australia’s international taxation as it not only aligns Australia’s taxing rules with international practice but will encourage foreign inflows and stronger relations between foreign funds and Australian fund managers. The full announcement can be accessed ...
New Fund Launch – One Cash Management Fund
10 December 2010 - One Investment Group is pleased to announce the launch of the One Cash Management Fund.
Taxation of Private Equity
1 December 2010 - The Australian Tax Office has confirmed its position that the Private Equity investments in particular gains on sale of shares in Australian companies should be taxed on revenue account as opposed to capital for tax purposes, thereby preventing Private Equity firms from distributing their gains and losses to investors subject to the capital gains tax regime. The Tax Office’s view is outlined in the finalised Tax Determination TD 2010/21 (previously in draft form TD 2009/D18). The main impact of the Tax Determination will be felt by non-resident investors and the private equity industry who sought to access preferential tax treatment by flowing investment capital gains to non-resident investors. The Industry and various professional bodies are now in the process of lobby against the Determinations which are believed to hinder foreign investment and capital inflow into Australia.
New Fund Launch
09 August 2010 - One Investment Group announces the launch of the One Equity Opportunities Fund No. 1
Everest Financial Group Update
13 July 2010 - The Board of Everest Financial Group released an ASX announcement advising that they had entered into a binding Implementation Deed with One Investment Group. Entities within One Investment Group expect to assume the Responsible Entity/Trustee and management functions for the majority of Everest Financial Group’s funds within several weeks. One Investment Group has offered employment to a number of Everest Financial Group’s employees.
Everest Financial Group
02 July 2010 - The Board of Everest Financial Group released an announcement advising that its subsidiary, Everest Capital Limited, has accepted One Investment Group's unconditional offer to assume the fund management responsibilities currently undertaken by Everest Capital Limited and related entities for a majority of the Everest Financial Group's Funds under management.
Board of Taxation to Review Australian Tax Treatment of Collective Investment Vehicles
12 May 2010 - As part of the Government’s commitment to positioning Australia as a leading financial services centre, the Government has announced the appointment of the Board of Taxation to undertake a comprehensive review of the taxation of collective investment vehicles (CIV). The details of the review were announced by the Government on 12 May 2010 and will cover all aspects of the tax treatment of CIVs. The Board has also been asked to specifically assess the benefits of extending tax flow-through treatment for CIVs based on the character of their activities as opposed to the entity form, which could see recommendations for flow through taxation for non-trust CIVs in line with direct taxation for investors. The review follows recent changes to the tax treatment of Australian Managed Investment Trusts in response to recommendations made by the Board with a view to implementing simple, clear and harmonised tax rules to make the financial sector more efficient for Australian and foreign investors. The Board is required to report its findings for CIVs by December 2011.
MIT Changes, The Tax Benefits for Investors
Recent changes to the taxation of distributions to foreign investors in Australian managed funds will see a reduced rate of withholding, dropping from the current rate of 15% to 7.5% from 1 July 2010. There is also added advantage for resident and foreign investors, with eligible managed funds now able to treat certain fund assets on capital account, allowing investors to benefit from flow through capital gains tax treatment in respect of any gains realised from the disposal of those fund assets.
Latest News
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2012 FEDERAL BUDGET IMPACT – FOR MANAGED INVESTMENT TRUSTS
In an unexpected move, the Federal Government has announced in its 2012 Budget that the managed investment trust ("MIT") withholding tax rate would be increased from 7.5% to 15% ... -
New Fund Launch – KPI Global Fund
28 March 2012 – One Investment Group is pleased to announce the launch of the KPI Global Fund. -
New Fund Launch – Benlee Property Trust No 5
28 March 2012 – One Investment Group is pleased to announce the launch of the Benlee Property Trust No 5. -
ATO Draft Ruling – The Meaning of Income for Trust Tax Law purposes
On 28 March 2012, the ATO released draft tax ruling, TR 2012/D1, outlining the ATO’s view on the meaning of ‘income’ for trust tax purposes. The draft ruling ... -
FoFA Bills passed by the House of Representatives
On 22 March 2012, the progress of the FoFA legislation continued when two bills were passed in the House of Representatives. A number of provisions ...
