Govt aims to close stapled structure tax loophole

27 July 2018

The Turnbull Government said it is tightening the rules on stapled structures that have been used by foreigners to reduce the tax paid on the income they earn from their Australian investments.

Staples can present an unintended tax loophole available only to foreign investors and are usually used to invest in property, Treasurer Scott Morrison said.

Draft legislation released by the Turnbull Government shuts down this unintended tax concession by neutralising the tax benefits of certain stapled structures and tightening concessions available to foreign investors such as foreign sovereign wealth funds and pension funds, he said.

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The legislation also promotes more investment in affordable housing by allowing foreign investors access to the concessional managed investment trust (MIT) rate if they invest in affordable housing, Morrison said.

MITs will also be able to be used to invest in residential housing provided they do so primarily for rental purposes. However, access to conventional tax rates will only be extended to the income from such investment derived from affordable housing, he said.

The revised exposure draft also includes draft legislation to prevent foreign investors from accessing concessional MIT tax rates on agricultural land, he said.

“These reforms demonstrate the Turnbull Government’s continued action to protect the integrity of Australia’s corporate tax system and to ensure that foreign investors pay their fair share of tax,” Morrison said.

The exposure draft legislation and explanatory materials are available on the Treasury website and the Government has encouraged all interested parties to make a submission by 10 August, 2018.

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