Brendon Lamers and Scott Farrell analyse the Government's proposed stapled structure integrity rules.
Further to the May 2018 stapled structure exposure draft legislation, Treasury has released a consultation paper setting out proposed integrity rules for stapled structures eligible for transitional relief. These rules will impose additional conditions on pricing cross staple rent during the transitional period to prevent aggressive pricing.
In May 2018, the Government released for consultation an Exposure Draft (ED) and explanatory material in relation to the Treasury Laws Amendment (Stapled Structures and Other Measures) Bill 2018, to address perceived imbalances in the way the Australian tax system taxes foreign investors.
Broadly, the ED introduced new concepts to the Managed Investment Trusts (MIT) regime aimed at preventing trading income being artificially converted into concessionally taxed passive income through the use of stapled structures. Transitional periods were also introduced, allowing concessional MIT withholding tax rates to continue to be available on cross-staple rental arrangements over:
On 28 June 2018, Treasury released the Stapled Structures – Integrity Measures Proposal Paper, introducing measures to prevent projects from adopting aggressive cross-staple pricing during the transitional period. The key aspects of the Consultation Paper include:
KPMG has prepared a Brief (PDF 207.4KB) summarising the measures in further detail. The consultation period ends on 12 July 2018.