There has been a renewed focus on taxation reform in the wealth management industry during the last 12 months, particularly in the managed funds and superannuation sectors. These reforms are part of the Federal Government’s continued agenda to provide greater certainty for investors and promote Australia as a leading financial services hub.
In response to the Board of Taxation’s 2009 review of managed investment trusts (MITs), the Federal Government has announced tax changes that will fundamentally change the way MITs are taxed and may affect returns to investors. The new regime is complex and fund managers need to take immediate action to assess each fund’s eligibility to be a MIT and consider the need to make appropriate MIT elections – for example, in relation to capital gains tax.
Some of the changes in the third wave of MIT reforms announced in May 2010 will require scheme constitutions
to be amended and product disclosure statements varied.
Support has also been given for nearly all of the recommendations contained in the Johnson Report Australia as a Financial Centre, including the introduction of a tax regime for investment managers. These initiatives will be the subject of further consultation, and fund managers will need to monitor and determine the impact of these proposals as they are announced.
The recent tax reforms are a welcome step towards enhancing the competitiveness of the Australian financial services industry, but will require careful analysis and continued action
by fund managers.