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Distributions of Managed Investment Trust Income to Foreign Residents – Draft Regulations


Friday, 6 June 2008

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Distributions of managed investment trust income to foreign residents – further consultation – information exchange countries

The Government is replacing the existing 30 per cent non final withholding tax regime applying to distributions of Australian source net income (other than dividends, interest and royalties) from managed investment trusts to foreign residents with a new withholding tax regime. It will cover distributions made directly from managed investment trusts as well as distributions made through other entities.

The nature of the new withholding tax regime for these distributions will depend on the residency of the foreign investor. Where the foreign investor is resident in a country with which Australia has effective exchange of information (EOI) on tax matters, the tax treatment will be as follows:

  • fund payments of the first income year following Royal Assent of the enabling legislation will be subject to non final withholding at 22.5 per cent;
  • fund payments of the second income year will be subject to a 15 per cent final withholding tax;
  • fund payments of the third and later income years will be subject to a 7.5 per cent final withholding tax.

As a transitional measure, for the first income year of operation, such investors will be eligible to claim a deduction for expenses related to their fund payments, with the net amount to be subject to tax at a new rate of 22.5 per cent.

Foreign investors of jurisdictions with which Australia does not have effective EOI will be subject to a 30 per cent final withholding tax.

The following bills were introduced into the House of Representatives on 4 June 2008 in relation to the new regime:

  • Tax Laws Amendment (Election Commitments No. 1) Bill 2008;
  • Income Tax (Managed Investment Trust Withholding Tax) Bill 2008; and
  • Income Tax (Managed Investment Trust Transitional) Bill 2008

Countries with which Australia has effective EOI are to be specified in the Tax Administration Regulations 1976.

The Government is seeking comments and submissions by 5pm Wednesday 11 June 2008 to assist in settling the final legislative features of the measure. A copy of the draft regulations is contained in the publication Distributions of Managed Investment Trust Income to Foreign Residents – Draft Regulations.

On 13 May 2008, the Treasurer, the Hon Wayne Swan MP, released Media Release 043 – Establishing Australia as a Regional Financial Hub.

Submission closing date: 11 June 2008

Please provide submissions to either: jo.laduzko@treasury.gov.au and greg.wood@treasury.gov.au

Documents Available:

Acrobat (PDF) documents

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Distributions of Managed Investment Trust Income to Foreign Residents – Draft Regulations  17.15kb

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