ATO to adopt more stringent approach to MITs
Small to medium-size fund manager are expected to struggle to be prepared of the Australian Taxation Office's (ATO's) new tax regime for manager investment trusts (MITs), a tax lawyer believes.
Hall and Wilcox tax partner, Anthony Bradica, warned that ATO will take an "all bets are off" approach to fund managers who do not choose to participate in the new regime from 1 June 2016.
"The new regime is more prescriptive than the current trust tax rules," he said.
"In the past, the ATO allowed some leeway in applying the tax law to investment trusts, including a ‘practical' rather than a technical approach to certain key issues like fixed trust treatment and dealing with ‘unders and overs'.
"But from 1 July, fund managers and trustees can expect the ATO to be less forgiving for those funds that hold off on entering the new regime."
Bradica said many of the country's large fund manager were well prepared for the new changes, known as the Attribution Managed Investment Trust (AMIT rules), but many small to mid-sized managers are waiting.
"Our feedback from some in the industry shows concern about the amount of regulatory, drafting and tax work that will be required in a short period of time," he said.
He warned fund managers may need to conduct a feasibility study, to assess whether, and when, the fund should participate in the new AMIT regime and what documentation, systems and processes need to be updated.
"Most investment funds will need to amend their deeds and other documents and the trustee will need to assess whether member approval for the changes is required," he said.
"They will also need to change their systems and processes. For example, new distribution statements will be required."
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