Details of revised MIT definition announced
21 June 2010
On 21 June 2010 the Government announced further details of amendments to the definition of a MIT to widen the scope of trusts to benefit from taxation concessions available through the capital account and withholding tax arrangements.
The new definition of a MIT includes:
- an extension of the widely held rules for trusts that are unregistered wholesale funds to all wholesale funds whether registered or not;
- the insertion of a new widely held rule for registered funds that allows a specified widely held entity to hold between 25 to 60 per cent of the qualifying MIT;
- an expansion in the widely held rules for registered trusts to more appropriately recognise the nature of certain widely held members, including a reduction in the wholesale member requirements from 30 to 25 wholesale members for wholesale trusts;
- an expansion in the list of entities considered to be widely held to include foreign government pension plans, sovereign wealth funds and certain government agencies and widely held foreign equivalents of a managed investment scheme;
- the inclusion of a regulationâ��making power to provide for further expansion of the list of entities considered to be widely held if warranted;
- an 18-month start up period during which a trust may be treated as a MIT prior to meeting the widely held requirements in order to better facilitate the entry of new trusts into the MIT industry; and
- improved transitional rules, including an extension of the transitional rules to seven years for trusts that were MITs prior to these amendments.
There is also a requirement that a substantial proportion of investment management activities undertaken in relation to the assets of the fund connected with Australia are to be carried out in Australia. No form of management rule will be applied to non-Australian assets and the substantial proportion rule will not apply in relation to the capital account election measure at all.
Author: Yasser El-Ansary, Chief Executive, AVCAL
Author: Dr Noel Chambers, CEO, National Foundation for Medical Research and Innovation