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  • Eligibility requirements

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    A managed investment trust (MIT) is a publicly-held and commercially-operated collective investment trust that invests in primarily passive income activities. A trust qualifies as a MIT if all of the following apply for the income year in which it operates:

    If temporary circumstances beyond the control of the trustee exist, the trust may continue to be treated as a MIT where it is fair and reasonable to do so. These requirements apply to all MITs, regardless of whether they opt into the attribution regime as AMITs.

    Why there are eligibility requirements

    The eligibility requirements are designed to ensure that a MIT is a genuine collective investment vehicle, and to limit the ability of foreign residents to adopt trust structures to access concessional withholding tax rates.

    Under the MIT withholding tax regime, foreign investors are eligible for a reduced rate of withholding tax on fund payments from MITs if they are a resident of a country with which Australia has an effective exchange of information treaty.

    The 'Australian management' requirement in the MIT definition is designed to enhance the competitiveness of the Australian managed funds industry.

    The MIT definition has changed over time:

    • in 2016, the definition was relocated and minor changes made
    • in 2010, changes were made including to the scope of trusts and the widely held requirements
    • prior to 2010

    Managed investment schemes

    The term 'managed investment scheme' (MIS) is defined in Section 9External Link of the Corporations Act 2001 (Corporations Act). Management investment schemes are regulated by the Australian Securities & Investments CommissionExternal Link (ASIC).

    Widely held requirement

    The 'widely held' requirements differ depending on whether the MIT is:

    Registered MIS that is a retail trust

    A registered MIS that is a retail trust is widely held if any of the following are met:

    • is listed on an approved securities exchange in Australia
    • has at least 50 members
    • has one or more specified widely held entities that together hold more than 25% of the participation interests in the trust and no other type of single entity holds more that 60% of the participation interests.

    Registered MIS that is a wholesale trust

    A registered MIS that is a wholesale trust is widely held if it has either:

    • at least 25 members
    • one or more specified widely held entities that together hold more than 25% of the participation interests in the trust and no other type of single entity holds more that 60% of the participation interests.

    Unregistered MIS that is a wholesale trust

    An unregistered MIS that is a wholesale trust is widely held if it has at least 25 members.

    Specified widely held entities

    Specified widely held entities include a:

    • foreign collective investment trust with at least 50 members
    • life insurance company or foreign life insurance company
    • complying super fund, complying approved deposit fund or foreign super fund with at least 50 members
    • limited partnership, if at least 95% of its membership interests are directly or indirectly held by specified widely held entities and the remaining membership interests are beneficially owned by a general partner that manages the limited partnership
    • directly or indirectly wholly-owned subsidiary of a specified widely held entity.

    Participation interests

    'Participation interest' refers to the greater percentage held by the entity of the:

    • interests (by value) in the trust
    • control of rights attaching to membership interests
    • rights to distributions from the trust.

    Closely held restriction

    There are restrictions on the extent to which a trust can be 'closely held'. The closely held restrictions differ depending on whether the MIT is:

    Specified widely held entities and trusts in a chain of trusts are treated as not having an interest in the trust for the purpose of the closely held rules.

    Registered MIS that is a retail trust

    To meet the closely held restriction, a registered MIS that is a retail trust must not have:

    • 20 or fewer persons holding 75% or more of the participation interests or
    • one foreign resident individual holding 10% or more of the participation interests.

    MIS that is a wholesale trust

    To meet the closely held restriction, a registered or unregistered MIS that is a wholesale trust must not have:

    • 10 or fewer persons holding 75% or more of the participation interests or
    • one foreign resident individual holding 10% or more of the participation interests.

    Appropriately regulated entity

    The trust must be registered under section 601EBExternal Link of the Corporations Act or, if a wholesale trust, under section 275-15 of the ITAA 1997.

      Last modified: 22 Feb 2023QC 47436