The Australian government is reviewing the tax policy
applicable to stapled structures, which are commonly used in
the real estate, infrastructure and related sectors following
the issue of Australian Taxation Office (ATO) Taxpayer Alert
2017/1 and a Treasury consultation paper earlier in 2017.
Many traditional, critical infrastructure assets, including
roads, rail, ports, certain utilities, electricity generation,
transmission and distribution assets and related infrastructure
are commonly held in stapled structures (i.e. stapled companies
and trusts, the latter being a 'flow through' vehicle).
The ATO, treasury and government have been concerned about
the significantly expanded use of stapled structures in recent
years, including both listed and unlisted trusts, including
managed investment trusts. Foreign investors currently secure
concessional withholding tax (15%) on distributions of net
income (essentially rental income and capital gains) by
qualifying managed investment trusts.
The government review has attracted much interest from a
broad range of foreign investors in Australian real estate,
infrastructure and related assets, including foreign-based
multinational corporations, foreign pension funds, sovereign
wealth funds and other institutional investors. The review is
expected to be progressed and recommendations made for
potential changes in the tax policy applicable to stapled
structures later in 2017/early 2018.
It is noteworthy that several of the recently privatised
infrastructure assets – electricity distribution and
transmission and ports – in New South Wales have been
structured by way of stapled structures.
Separately, Kelly O'Dwyer, minister for revenue and
financial services, recently established an expert advisory
panel to advise the government on proposed whistleblower
initiatives and related legislative reform.
The government is committed to meaningful protection for
individuals who report corporate fraud or serious misconduct,
tax evasion or avoidance and has mandated the expert panel to
develop a strong legal framework to enable regulators and law
enforcement agencies to quickly and decisively act on
whistleblower information and reports.
Affordable housing managed investment trusts
Finally, the government has recently issued exposure draft
legislation to enable managed investment trusts (MITs) to
invest in affordable housing (for low income groups) and
thereby access, amongst other things, the concessional MIT
withholding tax rate of 15% for eligible foreign residents.
This initiative is strongly targeted at attracting foreign
investors into this market segment in Australia that is
expected to significantly develop in the coming years. There
are strict qualifying criteria and it is expected that the
draft legislation will progress into law in the short term, as
it is meant to be applicable from July 1 2017.
Jock McCormack (firstname.lastname@example.org)
DLA Piper Australia
Tel: +61 2 9286 8253
Fax: +61 2 9286 8007