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Accounting firm BDO has criticised the Government for not adopting a number of recommendations made by the Board of Taxation in relation to the tax reforms for managed investments trusts (MITs).
The firm stated that the new tax rules would create uncertainty and additional compliance complexity, which might reduce returns for investors.
“Though BDO welcomes the broad thrust of the reforms, we are concerned these proposed measures may create new sources of uncertainty for MITs,” said Aldrin De Zilva, BDO’s Victorian head of corporate and international tax.
“MITs will need to review and amend their constituent documents to ensure they comply with the proposed new tax laws. Further, many trusts will be concerned that changing their trust deeds will constitute a so-called resettlement of the trust, which will cause a taxable capital gain on the assets of the MIT.”
De Zilva is also critical of the fact that the Government has deferred certain recommendations pending further industry consultation. He said the Government should have immediately supported the recommendation to provide relief in relation to the resettlement issue, which would only create uncertainty and increase the compliance costs associated with moving to the new MIT regime.
BDO is also concerned the Government did not adopt the recommendations to modify the range of income a MIT can earn without jeopardising its status as a flow through vehicle, address property trusts and the sector’s ability to maximise revenue from non-rental income or consider recommendations regarding the assessment of a trust as a company.
