New CCIV regime might help improve competitiveness of Aussie funds

The new corporate collective investment vehicle (CCIV) regime, that was proposed by the Federal Government, might help improve the international competitiveness of Australian fund manager and simplify some inbound Australian investment structures, KPMG said.

However, according to KPMG’s partners Natalie Raju and Jamie Levy, it was unclear how extensively the new regime would be used.

“Australia’s ability to attract foreign investment has for many years been sub-optimal due to the reluctance of certain overseas investors to put their money into trust structures,’ they said.

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“The CCIV regime would create an alternative for Australian Investment outside of traditional trust structures.”

They stressed that the new regime should also focus on the simplicity and cost-competitiveness as well as commercial advantages when compared to the existing Australian managed investment scheme (MIS) regime.

According to the experts, certain features of the proposed wholesale regime, such as the requirement for the corporate director to be an Australian public company, would present additional cost and complexity compared to the current requirements for a wholesale MIS.

Also, in case of the retail fund, the requirement to have a separate and independent depository entity with supervisory responsibilities, would impose a risk of additional costs compared to the structures currently in use.

Therefore KPMG’s recommendations submitted on the exposure draft included the necessity of:

  • Clear guidance on what steps are required in order to transition from an MIS to a CCIV
  • The tax legislation that would allow a capital gains tax (CGT) rollover on transitioning from a MIS to a CCIV
  • CCIV should be allowed to distribute surplus cash flow on a “tax-deferred” basis in the same way as an MIS is able to
  • Commitment to a post-implementation review of the effectiveness of the CCIV within two years of the legislation entering into force
  • A sub-fund of a CCIV should be protected from creditors of any other sub-fund of the same CCIV, in the event that any of those other sub-funds should become insolvent
  • The test for depositary’s independence should be modified such that the sole requirement was for it to have a minimum number of independent directors
  • Retail investments in the CCIV by employees of the corporate director or of the investment manager should not cause the CCIV to be classified as retail
  • The requirement for the corporate director of a wholesale CCIV to be a public company should be deleted and the registration as a CCIV should be a component of the corporate director incorporation process

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