Contact: Louise Denver
Deloitte
FSI Communication Consultant
02 9322 7615

Contact: Peter Kennedy
Deloitte
Partner, tax services
02 9322 7407

Fund manager trustees might have been dreaming of major tax reforms like deeming all gains on disposals to be eligible for the capital gains tax concession, but instead they will have to settle for some minor changes mostly aimed at collecting more tax, according to Deloitte Financial Services Tax Partner Peter Kennedy.

“As opposed to making their job easier, their day to day tax administration will be little different”, he said.

“Nevertheless managers will be pleased with the superannuation changes because they will increase savings and therefore increase funds under management,” he said.

“They will now have to deduct tax when making distributions to non-resident trusts.  On the one hand that means they no longer need to identify and segregate these investors, which is an advantage; but on the other hand they will have to do this for distributions made from 1 July 2006, even though no legislation is likely to exist to impose the liability. 

“Some managers may even find that they do not have power under their trust deed to withhold the ‘expected’ tax,” said Mr Kennedy.

“Another change is that the tax rate on distributions to non-residents will be set at 30%, instead of the range of rates currently applicable. This will apply to all taxable distributions other than dividends and interest.  This non final ‘withholding tax’ will replace the current system that requires the Tax Office to assess each investor individually, which has created an enormous administrative problem for managers and the ATO alike.

“The superannuation changes are like a Christmas present to fund managers,” Mr Kennedy said, but as for deeming gains on the disposal of shares to be eligible for the capital gains tax concession, he could only say, “Maybe next Christmas”.