25 Feb 088 Board of Taxation to review the taxation of managed fundsIn a media release issued on 22 February 2008, the Assistant Treasurer, Chris Bowen, announced that the Government has asked the Board of Taxation to review the taxation arrangements that apply to managed funds. The Minister also released a consultation paper on interim changes to trading trust rules which apply to real estate investment trusts.
In conducting the review, the Assistant Treasurer has asked the Board, within the broad policy framework for the taxation of trusts as outlined in the Terms of Reference, to consider:
- international developments especially those in the US, UK and Canada.
- alternatives to the use of present entitlement to determine the income tax liability of beneficiaries and trustees, but which also provide broadly similar taxation - outcomes for beneficiaries, having regard to the costs and benefits of those options;
- the international competitiveness of Australia's real estate investment trusts; and
- the desirability of extending relevant aspects of the recommended changes to the tax arrangements for other trusts.
Included in the review will be options to reform the trading trust rules in Division 6C of ITAA 1936 which particularly affect real estate investment trusts.
"Pending the release of the Board's report, I have released a consultation paper on the interim measures to remove the more burdensome elements of Division 6C," Mr Bowen said. The Treasury consultation paper (for which submissions are sought by 17 March 2008) covers:
- Ways to clarify the scope and meaning of investment in land for the purpose of deriving rent.
- A 25% allowance for non-rental income from an investment in land could be created to clarify the meaning of ‘primarily' in the context of investing in land for the purpose, or primarily the purpose, of deriving rent.
- An expansion of the range of financial instruments that a trustee could trade or invest in without triggering company taxation.
The Board will conduct consultations and make recommendations on the appropriate tax treatment of managed funds in accordance with the review's Terms of Reference. It will provide a final report around the middle of 2009.
For a copy of the Minister's media release (including the terms of reference of the review), No 2008/010, 22 February 2008, go here
For a copy of the Treasury consultation paper, go here
For information of the Board of Taxation's review, go here
For a copy of the Minister's address to IFSA Member Luncheon, held in Sydney on 22 February 2008, go here