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17 December 2014
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Global Tax Alert
Australian Government
announces tax plans impacting
the asset management industry
and financing Australian entities
investing overseas
On 15 December 2014, the Australian Treasurer released the 2014-15 Mid-Year
Economic and Fiscal Outlook (MYEFO). The MYEFO announcements included
changes to the taxation of managed investment trusts, the investment manager
regime and the deductibility of interest on debt used to fund non Australian
subsidiaries.
Managed Investment Trusts
Certain minor changes to the proposed managed investment trust (MIT) tax reforms
are confirmed and the start date is still listed as 1 July 2015. These changes are
proposed to:
• Better target the arm’s length rule to transactions most likely to give rise to tax
integrity risks
• Better target the circumstances in which an administrative penalty for a breach of
the new “unders and overs” rules may apply and reduce the compliance costs of
remedying the breach
The MIT measure will also clarify the treatment of tax deferred distributions paid by
MITs from 1 July 2011 to legislate the longstanding industry treatment, that they
are not taxed as ordinary income. The Australian Taxation Office (ATO) will also be
prevented from making related amendments to assessments for earlier periods. It is
also proposed to treat foreign life
insurance companies as a specified
“white list” entity for the purposes
of the MIT widely held test with
effect from 1 July 2014.
arrangements in Australia will now
apply from the 2015-16 income
year with an option for investors to
apply the legislation from the 201112 income year.
Treasury is working on the drafting
of the MIT law changes with a
public exposure draft scheduled for
release in early 2015.
This delay likely reflects that
Treasury is re-drafting the law
after having received significant
consultation input on the earlier
draft law. The optional early start
also appears to recognize that the
IMR3 drafting will correct some
gaps in the current investment
Investment manager regime
The MYEFO announced that the
investment manager regime
tranche 3 (IMR3) proposals for
a tax exemption on the gains of
widely held foreign funds that
have invested in certain financial
2
manager regime legislation, which
are potentially significant for some
inbound investors.
Global Tax Alert
Financing Australian entities
investing overseas
The Government will not proceed
with a previously announced
measure to deny the ability of
Australian entities to claim interest
deductions on debt used to fund
non-Australian subsidiaries.
The Government had previously
announced that it would consider
introducing a more targeted
anti-avoidance measure than
that announced by the previous
government, however, the latest
announcement means this measure
will not go ahead at all.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Australia), Sydney
• Daryn Moore
+61 2 9248 5538
• Michael Anderson +61 2 8295 6991 • Sean Monahan +61 2 8295 6226 • Antoinette Elias
+61 2 8295 6251
daryn.moore@au.ey.com
michael.anderson@au.ey.com
sean.monahan@au.ey.com
antoinette.elias@au.ey.com
Ernst & Young (Australia), Melbourne
• Peter Janetzki
+61 3 8650 7525
peter.janetzki@au.ey.com
Ernst & Young (Australia), Adelaide
• Janet Finlay +61 8 8417 1717 janet.finlay@au.ey.com
Ernst & Young (Australia), Brisbane
• Paul Laxon
+61 7 3243 3735
paul.laxon@au.ey.com
Ernst & Young (Australia), Perth
• Craig Robson +61 8 9429 2271
craig.robson@au.ey.com
Ernst & Young LLP, Australian Tax Desk, New York
• Andrew Nelson
+1 212 773 5280
andrew.nelson@ey.com
Global Tax Alert
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EYG No. CM5023
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