The Australian government has initiated several consultation processes with a view to progressing key proposed reforms to the corporate collective investment vehicles (CCIV) regime, venture capital concessions and a review of the 2021 foreign investment reforms.
In a joint media release on August 27 2021, the Australian Treasurer and Assistant Treasurer announced further consultation on the proposed CCIV regime with a view to introducing legislation into parliament as soon as convenient. Draft legislation dealing with key regulatory and tax aspects of the proposed regime, along with explanatory materials, were also publicly released.
The proposed CCIV regime would introduce an alternative investment vehicle largely similar to and aligned with the existing attribution management investment trust (AMIT) regime that could be utilised by Australian fund managers to invest in infrastructure, real estate, equities and certain alternative assets.
The introduction of the CCIV regime is intended to make Australia more competitive internationally and to attract more foreign capital into our managed funds sector. It is also intended to provide a flexible vehicle structure to assist with the proposed Asia funds regional passport – and related international reciprocity of regulatory recognition/approval.
The CCIV regime was originally proposed as part of the 2016–2017 Australian federal budget however, certain concerns and reservations arose with the earlier draft legislation for this regime, both from a regulatory and tax perspective – which have now mostly been positively addressed.
The highlights of the proposed new CCIV regime which will provide a new type of company limited by shares, include that it will:
- Provide a new ‘flow-through’ vehicle (other than a trust structure) which is equivalent in tax treatment to the existing AMIT regime.
- Allow different sub-funds of the CCIV to provide multiple products and investment strategies within the same vehicle.
- Provide flexibility to cross invest between different sub-funds.
- Allow a potential listing of a retail CCIV with one sub-fund.
- Provide access to the Capital Account Election.
The principal tax related amendments are contained in new Sub-division 195-C which effectively deems a trust relationship to exist between the CCIV, the business, assets and liabilities referable to each sub-fund, and the relevant class of members, for purposes of all tax laws (unless specifically excluded, for example the Foreign Acquisitions and Takeovers Act 1975).
The Australian government views the creation of the new CCIV regime as a critical priority in positioning internationally Australia’s managed funds industry. A limited consultation period has been provided through to September 24 2021 and the government is committed to establishing the new regime from July 1 2022.
Venture capital concessions
In July 2021 the Australian government released a consultation paper seeking comments and recommendations on Australia’s principal current venture capital concessions including by reference to the existing Venture Capital Limited Partnership, Early Stage Venture Capital Limited Partnership and Australian Fund of Funds Programmes. These concessions generally support early stage and smaller scale venture capital management and related activities, most particularly to assist Australian start-ups to access capital on a competitive basis.
Consultation with, and submissions to Australian Treasury and Industry Innovation and Science Australia closed on September 3 2021 and focused on encouraging further innovation and entrepreneurial risk taking.
Foreign investment reforms
The Australian Treasury released a consultation paper in late July 2021 seeking feedback and recommendations on a broad range of issues associated with the 2021 reforms to Australia’s foreign investment review/approval regime. Many of the reforms and existing regimes focus on protecting our national security given the rapid technological changes occurring and developments in the international security environment.
It is expected that there will be a continuing review and update of the current foreign investment review regime given the sensitivities
associated with national security, although streamlined processes and other efficiencies are being pursued where appropriate.
Further reviews and consultation on the proposed patent box concession (17% tax rate) impacting principally the medical and biotech sectors, although potentially low emissions energy technology, are currently under way and all of these consultation processes are expected to give rise to recommendations or further reforms in the coming months.
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