The Australian government released exposure draft legislation on Friday 25 August on the proposed new corporate collective investment vehicle (CCIV) regime and the associated Asia region funds passport for consultation and public comment up to September 21 2017.
The CCIV regime will provide a new type of investment vehicle via a company structure that will allow Australian fund managers to more readily offer investments through an internationally recognised vehicle rather than the more common trust structure in Australia.
While the exposure draft legislation deals with the regulatory/corporations law framework, the taxation framework is expected to allow CCIVs to be treated as akin to an attribution managed investment trust (AMITs) as per division 276 of the Income Tax Assessment Act 1997.
These CCIVs will be provided 'flow through' treatment and investors will generally be taxed as if they have undertaken investments directly. The capital account election for AMITs will be available and non-resident investors in eligible CCIVs will be taxed at concessional rates (generally 15%) on attributed income subject to the withholding tax provisions. The usual passive investment and widely held requirements will be important to satisfy. These CCIVs should be of interest to private equity, real estate and infrastructure funds amongst others.
The Asia region funds passport initiative will allow collective investment schemes based on and regulated in one economy (the home economy) to be 'passported' or sold to investors in other economies in the region (host economies). This essentially will occur through mutual recognition whereby two or more sufficiently equivalent jurisdictions agree to recognise key aspects of each other's regulatory systems, thereby streamlining public disclosure and related requirements to this initiative. In addition to Australia, Japan, Korea, New Zealand and Thailand are participating in the region.
Separately, Chevron Group has withdrawn its appeal to the High Court over the deductibility of interest and related penalties associated with intragroup loans between Australia and the US. The Australian Taxation Office (ATO) and Chevron Group have settled their dispute and details of these arrangements are confidential and are unlikely to be released publicly. Company debt arrangements continued to be a major compliance issue and focus for the ATO and we expect further cases to come before the courts on these issues which can impact not only on interest deductibility, but also thin capitalisation, transfer pricing and related anti-avoidance rules. The ATO views the Chevron case as a significant win and time will tell whether it was decided on the special facts including the circular nature of the borrowing arrangements.
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