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Technical Amendments to AMIT Scheme: What you need to know

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This article was written by Richard Snowden, Kai-Chen Lamb and Ed Slattery. 

Exposure draft of bill released

On 18 June 2018, the Federal Government released an exposure draft of technical amendments to the Attribution Managed Investment Trusts (AMIT) scheme. Broadly, the draft implements the changes proposed in July 2017 which are designed to address various practical issues that had arisen in the implementation of the AMIT scheme.

What do you need to know?

A summary of the major changes made by the draft Bill to resolve the various issues are noted below:

Issue

Proposed Draft Technical Amendment

Single Unit Holders

MITs with a single unitholder could only access AMIT eligibility if their single unitholder was another MIT.


MITs with a single unitholder can satisfy the AMIT eligibility requirements if the only member is a specified widely-held entity.  This should allow "captive" trusts of complying superannuation funds and other specified widely-held entities to access the AMIT regime, from the 2017/2018 income year.

Discount Capital Gains

In calculating rounding adjustments and trustee shortfall tax for the character of discount capital gains, the determined member component was calculated on the non-discounted amount.


In calculating rounding adjustments and trustee shortfall tax for the character of discount capital gains, the determined member component (and the determined trust component) will be calculated on the discounted amount.

CGT Event E10

Where a member of an AMIT receives non-assessable distributions from the AMIT, the cost base of the membership interest is reduced to nil by the net amount of adjustments and any remaining excess gives rise to a capital gain under CGT event E10.


Where a member of an AMIT receives non-assessable distributions from the AMIT and the cost base of the membership interest cannot be reduced to nil (as it was already nil), the net amount of adjustments will give rise to a capital gain under CGT event E10.

Alignment of CGT position of MITs and AMITs

For MITs that are not AMITs, the portion of the capital loss or net capital loss which has been used to reduce a capital gain reflected in the payment made by a trust may in certain circumstances be excluded from giving rise to a reduction in the cost base of units.  This is in contrast to the position provided for AMITs.


Capital gains that have been applied against capital losses will not be excluded from the amount of non-assessable payments in determining the reduction in cost base that arises where the entity making the payment is a MIT.

Alignment of AMIT / MIT treatment of non-taxable Australian property

In calculating a fund payment, whether or not capital losses are from non-taxable Australian property are disregarded by a MIT or an AMIT.


In calculating a fund payment of a MIT or AMIT, capital losses from non-taxable Australian property which have been applied against capital gains from taxable Australian property will be added back.

Modification of Withholding Rules

Clarification was needed for the TFN withholding application.


In relation to AMITs, deemed payments will now be subject to the TFN withholding rules.  However, any amounts which have already been subject to TFN withholding will be excluded from these deemed payments.

Franking Credits

Former public trading trusts and corporate unit trusts cannot distribute accumulated franking credits from 30 June 2016.


Former public trading trusts and corporate unit trusts will be able to distribute franking credits until 30 June 2018, provided that the distribution is paid out of income derived before 1 July 2016.

Substituted Accounting Periods

MITs can elect into the AMIT regime for income years commencing on or after 1 July 2016 – however this caused issues for SAPs which started before that date.


MITs with substituted accounting periods will be able to elect into the AMITs regime for the 2016-17 income year and later income years (regardless of whether the SAP started before 1 July 2016.


What happens next?

The Government is seeking submissions on the draft Bill and the explanatory materials by 16 July 2018. Please contact us with any questions you have about the proposed changes including any comments you may have that you would like included in a KWM submission.

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