Other than incidental
construction activity that arises from the major budget
announcements, the Government has not provided much by way of
incentive to boost the property industry.
There are limited new developments for the property and funds
management industries in the budget. The revenue raising focus of
the budget has inevitably extended to this sector, impacting the
viability of projects and imposing further compliance burdens on
fund managers. However, benefits are expected to flow from some
There are no further developments that impact on the Managed
Investment Trust (MIT) regime and Investment Manager Regime (IMR).
These previously announced reforms will continue through normal
As noted in our Business Tax section, the Government proposes to
tighten the thin capitalisation rules, which restrict a
taxpayer's debt deductions once permissible debt levels are
exceeded. Under the proposed new safe harbour test, the maximum
permissible debt to total assets ratio of general entities will be
reduced from 75% to 60%. Further, the Board of Taxation will be
engaged to conduct a review of the arm's length test, which
allows greater debt levels than an entity's safe harbour amount
in certain circumstances. Access to arm's length test is
expected to be restricted following the review. These changes will
make it more difficult to fund large property and infrastructure
projects in the future.
However, the thin capitalisation limits will be eased in other
Inbound investors will be granted access to the worldwide
gearing test, which is normally only available to outbound
investors. Broadly, the worldwide gearing test allows a taxpayer to
retain a gearing level that reflects 120% of their group's
worldwide gearing level.
The de minimis exemption will increase from $250,000 to $2
million of debt deductions.
The proposed amendments are scheduled to apply from 1 July
Withholding tax on capital gains distributed to
From 1 July 2016, where a foreign resident disposes of certain
taxable Australian property, the purchaser will be required to
withhold and remit to the ATO 10% of the proceeds from the sale.
Accordingly, fund managers will need to have reporting systems in
place to identify acquisitions of affected taxable Australian
property and collect the withholding tax.
Foreign non-portfolio dividends
The Government will expand the scope of the tax exemption
available for foreign non-portfolio dividends so that it applies
where an Australian company receives foreign non-portfolio
dividends from an interposed trust. Accordingly, fund managers will
need to identify and report such dividends to investors. The
proposed amendment is scheduled to apply from 1 July 2014.
Significant Investor Visa
On a brighter note there are no changes to the Significant
Investor Visa which is seen as a major source of fund flow into the
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