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Managed investment trusts announcement clarifies critical grey areas


According to Deloitte Tax Partner Adele Watson, the announcement today by the Assistant Treasurer Nick Sherry on managed investment trusts (MITs) clarified two critical grey areas for the sector.

“The first affirms that MITs can distribute taxable net income if they have an accounting loss for instance, which will remove the uncertainty of additional tax being imposed on the trustee,” said Ms Watson.

“The other clarification is that the Government has accepted into tax legislation a long standing industry practice of carrying forward over and under distributions of trust income components to the next year, subject to certain caps.

“Managers will need to be mindful however, if the distributions fall outside the caps they will need to act, either by paying additional tax or by going back to the investor to advise the correct position.”

The majority of the recommendations contained in the report prepared by the Board of Taxation in its review of tax arrangements applying to managed investment trusts, have been adopted by the Government.

“It is great to see the Government taking a practical approach to these issues,” Watson said. “As no matter how careful fund managers are, it has not always been possible to have all the information required to disclose the correct components of income at the time of issuing the distribution statement to investors.”

“The recommendations made by the Government will enable managed investment trusts to allocate their taxable income between their investors without having to worry about the level of income in the trusts,” Watson said. “There has long been a question of whether a trust can distribute taxable net income if it has an accounting loss. In recent years a large number of funds incurred accounting losses and the industry has largely ignored this issue. This announced approach removes the uncertainty.

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Louise Denver
Job Title:
Director, Corporate Affairs & Communications
Tel: + 61 2 9322 7615, +61 414 889 857
Adele Watson
Deloitte, Australia
Job Title:
Tax Partner
Tel: +61 2 9322 7752, Mobile: 0404 063 026




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