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The tax ‘wish list’ for the CIV regime

The tax wish list

Natalie Raju discusses the introduction of a new tax and regulatory framework for collective investment vehicles.


Partner, Superannuation and Funds

KPMG Australia


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In 2016, the Federal Government committed to the introduction of a new tax and regulatory framework for two new types of collective investment vehicles (CIV): a corporate CIV and a limited partnership CIV. It is anticipated that the corporate CIV will be introduced this year and the partnership CIV next year. 

Whilst we are yet to see the details of the legal and regulatory framework for the corporate CIV (which are still being developed through detailed consultation), the managed funds industry and Treasury are now turning their focus to the next phase of the roll-out, being the tax framework for the corporate CIV.

Issues to be considered

So, what are some of the issues that need to be considered and what is on the tax ‘wish list’ for fund managers?

  • Flow through treatment – similar to the existing managed investment trust (MIT) structure, it is expected that the CIVs will have flow through status for tax purposes. In order to access flow through treatment, the CIV would presumably need to satisfy an eligible investment test (similar to our current public trading trust rules).
  • Attribution managed investment trust (AMIT) – it is anticipated that the determination of the income of the CIV will leverage the current AMIT regime, including access to various elections such as multi-classing to enable the tax segregation of sub-funds.
  • Simplified withholding tax – in order to ensure the successful export of the CIV, the Government’s proposal to introduce a simplified 5 percent non-resident withholding tax to all withholdable payments (excluding rental income and taxable Australian real property) should apply to CIVs and align with the commencement.
  • Conversion of current fund structures to a CIV – in order to be most effective, the CIV regime would need to accommodate the conversion of an existing MIT/ AMIT to a CIV or class of interests within a CIV through some form of tax roll-over relief. A practical example that we expect will be commonly sought after is multiple existing funds seeking to convert into respective sub-funds of the same CIV (ie an umbrella fund structure), without triggering tax or duty.
  • Consequence of CIV ineligibility – Under the current AMIT regime, in the event that a fund ceases to meet the eligibility requirements, it reverts to an ordinary Division 6 trust. However, in the case of a CIV, would the reversion be to a corporate vehicle taxed at 30 percent?
  • Eligible for the Asia Region Funds Passport – detailed consideration of the proposed framework will be needed to ensure that the new CIVs are eligible for the passport and not excluded from the concept of a ‘collective investment scheme’.
  • Taxation of Financial Arrangements (TOFA) hedging – ideally, we also like to see the much anticipated portfolio hedging provisions for managed funds expedited and unveiled as a key feature of the new CIV regime.

Whilst the 'wish list' may seem lengthy, the CIV is an important structural reform to the funds management industry, which will remove long standing barriers to attracting global investment. It is crucial that the tax framework supporting the CIV enables it to be an attractive alternative vehicle for investment both domestically and globally.

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