Review of the Tax Arrangements Applying to Collective Investment Vehicles
The Chairman of the Board of Taxation, Mr Dick Warburton AO, today announced the release of a discussion paper on the Board’s review of the tax arrangements applying to collective investment vehicles (CIVs).
This review arises from the report of the Australian Financial Centre Forum (AFCF) (which was released by the Government in January 2010) which recommended “that the Treasurer request the Board of Taxation to review the scope for providing a broader range of tax flow through collective investment vehicles” (Recommendation 3.3).
On 12 July 2010 the then Assistant Treasurer and the then Minister for Financial Services, Superannuation and Corporate Law announced the terms of reference for the review. The Board has been asked to examine and report on the tax treatment of CIVs, having regard to the managed investment trust tax framework and including whether a broader range of tax flow-through CIVs (such as corporate CIVs) should be permitted.
The review should have regard to the following broad principles:
- CIVs in this context are widely held investment vehicles (with typically long term portfolio investors) that undertake primarily passive investment activities, consistent with the eligible investment rules in Division 6C of the Income Tax Assessment Act 1936.
- The tax treatment of a CIV should be determined by the nature of its investment activities rather than the structure of the entity through which the funds are pooled.
- The tax outcomes for investors in a CIV should be broadly consistent with the tax outcomes of direct investment, other than flow through of losses (subject to limited special rules for their utilisation).
As part of the review, the Board is asked to examine the effectiveness of the special tax treatment accorded under the Venture Capital Limited Partnership regime in a way that recognises its policy objectives.
In making its recommendations, the Board should consider:
- the nature and extent of, and the reasons for, any impediments to investment into Australia by foreign investors through CIVs;
- the benefits of extending tax flow-through treatment for CIVs, including the degree to which a non-trust CIV would enhance industry’s ability to attract foreign funds under management in Australia;
- whether there are critical design features that would improve certainty and simplicity and enable better harmonisation, consistency and coherence across the various CIV regimes, including by rationalisation of the regimes where possible.
The Board was also asked to examine and report on the design of an investment manager regime for investments by foreign residents managed in Australia.
The recommendations should seek to enhance Australia’s status as a leading regional financial centre and support growth and employment in the Australian managed funds industry while maintaining the integrity of the tax system and revenue neutral or near revenue neutral outcomes.
To facilitate public consultation, the Board has developed the discussion paper.
The Board welcomes submissions on issues raised in the discussion paper and any other matters relevant to the terms of reference. The closing date for submissions is Monday 28 February 2011. Submissions may be sent to:
Facsimile: (02) 6263 4471
Review of the tax arrangements applying to collective investment vehicles
The Board of Taxation
c/- The Treasury
PARKES ACT 2600
To assist in the Review process, the Board is planning to conduct consultation meetings in Melbourne and Sydney in February 2011. To register your interest in attending a consultation meeting, please contact the Board of Taxation Secretariat on (02) 6263 4366 or email firstname.lastname@example.org.
Further information on the review is available on the Board of Taxation website, www.taxboard.gov.au.
Jorge del Busto
Board of Taxation Secretariat
Telephone (02) 6263 4365