A new tax system for managed investment schemes (AMIT regime)

A new tax system for managed investment trusts, referred to as the attribution managed investment trust (AMIT) regime, commenced on 5 May 2016.

Key information:

  • The AMIT regime contains a number of positive benefits for members
  • REs and trustees of qualifying schemes may opt in to apply the new regime for the 2015/16 financial year and onwards
  • Trust constitutions may need to be amended so the trustee can apply the new regime
  • Registered scheme constitutions can be amended without a member meeting in certain circumstances
  • ASIC is proposing to issue class order relief to REs of registered schemes to allow them to make changes to their scheme constitutions without a meeting to allow for the AMIT regime provided certain conditions are met 
  • REs of registered schemes and trustees of wholesale schemes need to consider what updates need to be made to their disclosure documents if they do, or do not, opt in to the new regime 

The introduction of the AMIT regime follows recommendations made by the Board of Taxation in its Report on the Review of the Tax Arrangements Applying to Managed Investment Trusts published in 2009.  In its report, the Board of Taxation concluded that the current taxation arrangements applying to trusts create a level of complexity and uncertainty for managed investment trusts that is unacceptable for an industry of its significance to the economy. Amendments to the tax laws to implement the recommendations of the Board of Taxation to create a new tax system for certain managed investment trusts have now been made.

Under the new tax system, an AMIT will have the following benefits:

  • the trust will be treated as a fixed trust for income tax purposes;
  • for income tax purposes, the trust will be able to attribute amounts of taxable income, exempt income, non-assessable non-exempt income, tax offsets and credits to members on a fair and reasonable basis in accordance with their interests as set out in the constitution of the trust; and
  • if a trust discovers a variance between the amounts actually attributed to members for an income year, and the amounts that should have been attributed, the trust will be able to reconcile the variance in the income year that it is discovered by using the ‘unders and overs’ regime

The AMIT regime can apply to both registered retail schemes and unregistered wholesale schemes that qualify as a ‘MIT’.

ASIC has announced it will grant relief to assist responsible entities (REs) of registered schemes make changes to their constitutions to adopt the AMIT regime without holding a members’ meeting, if one is necessary.

In order to rely on the relief, REs of registered schemes will need to post a statement on their website explaining that they intend to amend the constitution, the reasons for this and the effect of the amendments. The statement will also need to explain that members can make a request within seven days that a meeting be called and give an email address for members to make this request. If five percent or more of the total number of members request a meeting within seven days of the statement being posted on the website, a members’ meeting will be required to approve the amendments. If no members’ meeting is required after seven days since the statement was posted on the website, REs can make the amendments without the need for member approval.

ASIC says it is currently drafting an instrument to give effect to this relief and intends to release it on or before 22 June 2016.

Key questions

If you want to implement the new AMIT regime for the 2015-2016 income year or onwards, then you should consider the following questions:

  • Does my scheme qualify: is it a MIT?
  • Is it in the best interests of members for us to adopt the new regime? What are the consequences if we do not adopt the new regime?
  • What changes are required to be made to our scheme constitutions to allow us to adopt the new AMIT regime? 
  • Will those changes require member consent at a meeting (for registered schemes, will they adversely affect members’ rights)?
  • What else will we need to change if we do or do not adopt the new regime?  For example, are our statements about the tax implications for investors up to date in our disclosure documents and other materials?

If a member meeting is required to change your registered scheme constitution, then you will need to consider drafting the releases for your website in accordance with the relief instrument ASIC intends to issue.

Under the instrument, REs will also be granted relief from the duty to treat members who hold interests of the same class equally to the extent that it prevents an attribution being made in accordance with the requirements under the regime.

If you need assistance complying with the new regime, then please contact Chris Mee on +617 3324 2960.