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June 26, 2019

Australian Taxation Office releases draft views on new non-concessional MIT income rules from 1 July 2019

On 26 June 2019, the Australian Taxation Office (ATO) released a draft law companion ruling LCR 2019/D2 (the ruling) which provides the Commissioner’s preliminary views on the new non-concessional managed investment trust (MIT) income foreign resident withholding tax rules that will apply to income years commencing on or after 1 July 2019.

The new ”non-concessional” designation is for certain types of MIT income including:

  • MIT cross-staple arrangement income
  • MIT trading trust income
  • MIT agricultural income
  • MIT residential housing income

Affected fund payments will be subject to MIT withholding tax at 30%, subject to transitional rules and exemptions (which differ according to MIT income type). The rules introduce potential significant tax policy, operations and systems changes for affected businesses.

The 62-page draft ruling covers the key aspects of the measures, with a focus on MIT cross-staple arrangement income, providing guidance on:

  • When an amount is derived, received or made by a MIT
  • The meaning of ”cross-staple arrangement”
  • The scope of application to cross-staple arrangement income
  • The meaning of the terms ”facility” and ”economic infrastructure facility,” relevant for cross-staple arrangement transitional periods and exemptions
  • Integrity rules related to economic infrastructure facilities where income from land investments is derived
  • The meaning of:
    • MIT trading trust income
    • MIT residential housing income
    • MIT agricultural income
  • Transitional periods available for non-stapled non-concessional income amounts

There are 13 examples of the Commissioner’s interpretation in practice, particularly in relation to cross-staple arrangements, and the associated transitional rules and exemptions.

Once finalized the ruling is proposed to apply to 2019/20 and later income years fund payments made from 1 July 2019, in line with the enacted measures.

Comments on the draft ruling are due by 9 August 2019.

A more detailed Tax Alert will be forthcoming.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Australia), Oceania Sector Leader – Wealth & Asset Management, Sydney
  • Antoinette Elias |
Ernst & Young (Australia), Sydney
  • George Stamoulos |
  • Richard Lambkin |
Ernst & Young LLP (United States), Australian Tax Desk, New York
  • David Burns |
Ernst & Young LLP (United Kingdom), Australian Tax Desk, London
  • Naomi Ross |



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