AMIT & MIT regime amendments

Last month, the Government passed technical amendments & clarifications to the AMIT & MIT regime.

2019-04-18

The Bill and explanatory memorandum can be found here. We have summarised the key changes below:

Single unit holder MIT can elect into AMIT regime 

Effective date: 2017-18 income year

New law: MITs with a single unitholder can satisfy the AMIT eligibility requirements if their single unitholder is a specified widely-held entity.

Old law: Arguably, MITs with a single unitholder could only satisfy the AMIT eligibility requirements if their single unitholder was itself a MIT.

ShineWing Australia comment: The original law was unnecessarily restrictive and unintended. Specified widely held entities include complying superannuation funds, life insurance companies, MITs.

 

Aligning the CGT outcome of MIT and AMITs (clarification)

Effective date: 2017-18 income year
New law: If an entity receives a payment from a MIT, a capital loss reflected in the payment is treated as ‘non-assessable’ payment for purposes of CGT Event E4.

Old law: Arguably, a capital loss reflected in the payment did not reduce the cost base under CGT Event E4 (for MITs)

ShineWing Australia comment
Example – capital loss and CGT event E4

  • MIT makes a capital gain of $200 which is offset against $200 of capital losses. The MIT makes a distribution of $200 to unit holders.

  • The MIT will need to classify the payment as a non-assessable payment for purposes of CGT Event E4

  • The unit holders will need to reduce their cost base by $200. This was not required under the Old law.

 

In calculating a fund payment, capital losses from non-taxable Australian property will be added back

Effective date: 2018-19 income year

New law: In calculating a fund payment, capital losses from non-taxable Australian property which have been applied against capital gains from taxable Australian property will be added back.

Old law: Capital losses from non-taxable Australian property was able to be offset against taxable Australian property when calculating fund payment amounts.

ShineWing Australia comment

Example – NTAP losses

  • MIT made $5 million capital gain from sale of Australian property

  • MIT also had $7 million carry forward capital losses which offset the gain to nil

  • MIT made a distribution of $5 million with net taxable income of nil

  • For fund payment purposes, MIT must add back $5 million of NTAP capital losses which was offset against TAP capital gain

  • Therefore, the fund payment amount will be $5 million and withholding will need to be made on this.

 

Withholding MIT provisions apply to deemed payments

Effective date: 2018-19 income year

New law: Clarifies that an AMIT which only makes a deemed payment (and does not make actual cash distributions) may be treated as having been paid to the member by a withholding MIT or a custodian for the purposes of determining the withholding tax liability on the fund payment.

Old law: Clarification only

ShineWing Australia comment

If an AMIT pays TFN withholding in respect of a deemed payment because the investor has not quoted its TFN, the AMIT can recover the amount paid by withholding it from future payments due to the AMIT member.


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“Changes have been made to fine tune the AMIT and MIT regimes to ensure that they operate as intended.
However, the changes impacting capital losses may be significant for some funds."

Stephen O'Flynn

E [email protected]