The Australian government released draft legislation on
January 17 2019, outlining the tax and regulatory components of
the corporate collective investment vehicle (CCIV) regime,
which is intended to make Australia more attractive and
competitive in the funds management industry.
Broadly, CCIVs will offer an internationally recognisable
investment vehicle that can be readily marketed to foreign
investors, including through the Asia region funds passport
(ARFP), which provides a multi-lateral framework for eligible
funds to be marketed across member countries with limited
additional regulatory requirements.
The proposed draft legislation ensures that the tax
treatment of CCIVs broadly aligns with the existing treatment
of attribution managed investment trusts (AMITs), providing
investors with the benefits of flow-through taxation.
CCIVs will be subject to similar eligibility criteria as
managed investment trusts (MITs), such as being widely-held and
not closely-held, limited to passive income activities, and
being an Australian resident.
There are concerns within the industry that the draft
legislation in its current form may result in double taxation
for investors in certain circumstances (in comparison to the
AMIT/MIT regime), and various submissions addressing these
concerns have been made to the Australian Treasury.
Amendments to stapled structures legislation
In February 2019, certain amendments were made to
legislation dealing with the tax risks posed by stapled
structures. Broadly, the original legislation proposed changes
- Stapled structures, by increasing the
non-resident MIT withholding rate from 15% to 30% on certain
- Thin capitalisation, by preventing double
- The super fund withholding tax (WHT)
exemption for foreign residents, and
- The sovereign immunity tax exemption, to
limit access to tax concessions for foreign investors by
limiting the scope of the sovereign immunity tax
Broadly, the most recent amendments in February 2019 to this
legislation provide for the following:
- MIT taxation concessions for premises that
are used primarily for the provision of disability
accommodation, despite being residential premises; and
- Specific rules concerning the treatment of
certain premises used primarily to provide student
accommodation has been removed. This is in response to views
raised by some stakeholders in the inquiry by the Senate
Economics Legislation Committee.
Similar business test
The Australian government has finally passed the changes to
the company loss rules, which introduces the "similar business
These amendments are intended to overcome the restrictions
which discourage loss-making companies from seeking new
investors or exploring new profit-making activities for fear of
losing past year losses.
The new "similar business test" will supplement the "same
business test" for the purpose of working out whether a
company's tax losses and net capital losses from previous
income years can be used as a tax deduction in a current income
year. These measures will apply to income years starting on or
after July 1 2015.
Like the same business test, the focus of the similar
business test is on the identity of the business. The test
looks at all of the commercial operations and activities of the
former business and compares them with all the commercial
operations and activities of the current business to work out
if the businesses are similar.
Permanent place of abode
Australia's Full Federal Court has recently handed down an
important decision pertaining to the tax residency of a
taxpayer, and on the definition of a "permanent place of abode"
in this context. This decision is particularly important for
Australian expatriates living and working overseas.
The taxpayer in question was a dual citizen (Australian and
British), who permanently departed Australia in 2009. The
taxpayer lived in an apartment building in Bahrain, commuting
daily to Saudi Arabia.
For two years, he leased a two-bedroom apartment, but in
2011 he moved to a one-bedroom apartment in the same building
when he realised that his wife and children would not join
In summary, the court held that the taxpayer in question had
a permanent place of abode in Bahrain, even though he lived in
temporary accommodation, and therefore allowed his appeal
against a decision that he was a resident of Australia.
The court held that a "permanent place of abode" is not a
reference only to a person's specific house or flat or other
dwelling, but also refers to a town or country. The court
concluded that the evidence in this case showed that the
taxpayer had abandoned Australia as a place to live and work
and that his permanent place of abode was in Bahrain.
Accordingly, he was not a tax resident of Australia.
AMIT technical amendments
Broadly, the exposure draft of technical amendments to the
AMIT regime introduced by the Australian government in mid-2018
has now passed Parliament. The draft aims to address a number
of technical issues arising from the AMIT regime.
As a result, the AMIT technical amendments will shortly
Jun Au (firstname.lastname@example.org)
DLA Piper Australia