The Assistant Treasurer, the Hon Bill Shorten MP, recently
announced a 1-year deferral in the commencement date of the new MIT
regime from 1 July 2011 to 1 July 2012. The deferral is the result
of "overwhelming feedback" received during the
consultation process that, while supportive of this positive
reform, called for further time to ensure effective operation
within the new MIT tax system.
While the deferral is not a surprise (as there have been no
announcements from Treasury since the MIT Regime Discussion Paper
was released late last year), Moore Stephens welcomes this
announcement to ensure that the objectives of increased certainty,
reduced complexity and lower costs for MIT's and their
investors are realised.
We also commend the Federal Government on the two (2) following
changes it will make to the MIT tax regime to achieve the above
The introduction of legislative amendments to prevent any
income tax consequences that may arise from a trust resettlement
where a MIT changes its trust deed (or other constituent documents)
to satisfy the "clearly defined rights" requirement of
the new MIT tax system.
The alternative test of the de minimus rule allowing MIT's
to carry forward under and over distributions into the next income
year without adverse taxation consequences will now be "0.4 of
1% of net assets" instead of "prescribed dollar value per
The reason for this change was that this new alternative test is
more equitable for MIT's with a similar net worth but a
different number of units. The primary test of five (5) per cent of
taxable income will remain unchanged.
By way of background, the key aspects of the new MIT tax system
An elective 'attribution' system of taxation to replace
the present entitlement system, so that investors are only taxed on
the income the trustee allocates to them on a fair and reasonable
basis, consistent with their entitlements under the trust's
The establishment of a carry-over facility to deal with
'unders' and 'overs' within a 5% cap so trustees
are not required to reissue tax statements and investors are not
required to amend their income tax returns.
The removal of double taxation that may arise where the taxable
income of a MIT differs from the amount distributed to
The abolition of Division 6B of the Income Tax Assessment Act
1936, which relates to corporate unit trusts.
In the lead-up to the new start date of 1 July 2012, the
Government will continue industry consultation on the
implementation of the new MIT tax system and undertake public
consultation on draft legislation to be released in the coming
months. Mr Shorten acknowledged that there were "loose ends
raised by stakeholders" and that he would be "conveying a
roundtable with industry during the next few months to resolve
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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