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  • Stapled groups – Approved economic infrastructure facility exception

    From 1 July 2019, the higher withholding tax rate of 30% applies to managed investment trust (MIT) fund payments made to foreign residents that are attributable to ‘non concessional MIT income’ which include ‘MIT cross staple arrangement income’.

    Approved economic infrastructure facility exception

    An exception applies in respect of MIT cross staple arrangement income arising from cross staple arrangements that are covered by the approved economic infrastructure facility exception under section 12-439 of Schedule 1 of the Taxation Administration Act 1953 (TAA 1953).

    The approved economic infrastructure facility exception applies to an economic infrastructure facility or an improvement to such a facility approved by the Treasurer for this purpose.

    An operating entity in relation to a cross staple arrangement that is subject to the exception can also obtain a specific deduction for an amount of rent from land investment that is derived by an asset entity. Section 25-115 of the Income Tax Assessment Act 1997 (ITAA 1997) requires each relevant entity to make a valid choice.

    To make a valid choice under section 25-115 of the ITAA 1997, you must use the following form:

    When does the specific deduction apply?

    The operating entity may claim the specific deduction when the exception applies. The exception is available for 15 years from either:

    • the day an asset that is part of the facility is first put to use (for approved facilities)
    • the day an asset that is part of the facility is first put to use after it has been improved (for approved improvements).

    Who must make the choice?

    The choice must be made by each entity that is party to the cross staple arrangement that relates to the approved facility or approved improvement. This will be the operating entity that pays the rent and the asset entity that receives the rent.

    Both the operating entity and the asset entity are required to make the choice on separate forms and both entities are required to notify the Commissioner.

    If the operating entity is a subsidiary member of a consolidated group or MEC group, the choice must be made by the head company or provisional head company of the group at the time the choice is made.

    Once the entity makes the choice, it cannot be revoked.

    Information required in Section B for cross staple arrangements

    You need to list each cross staple arrangement under which rent from land investment is paid to you or by you in respect of an approved economic infrastructure facility or an improvement to a facility that is covered by the exception.

    You may list up to three different cross staple arrangements on the form. If an entity is party to more than three cross staple arrangements, these should be included on a separate document containing the required information and submitted with the form.

    Description of facility

    The response should describe the approved facility or facility that is subject to an approved improvement.

    This could include, for example: ‘electricity network’, ‘toll road’, or ‘port’.

    You need to indicate whether the approval relates to a new facility or an improvement to an existing facility.

    When the form is due

    The choice must be made no later than the start of the income year where either:

    • an asset that is part of the facility is first put to use (for approved facilities)
    • an asset that is part of the facility is first put to use after it has been improved under the improvement (for approved improvements).

    You must give this form to the Commissioner within 60 days of making the choice.

    For example, if you make the choice on 30 June 2020, you must give the form to the Commissioner no later than 29 August 2020.

    How to submit your form

    Lodge your form as an attachment via secure mail on the ATO portal after 28 April 2019.

    You need to be registered to access our online services – to learn more about our online services, visit ato.gov.au/onlineservices.

    More information

    For more information about this form:

    For more information about stapled groups and the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019, go to Stapled Structures.

      Last modified: 17 Apr 2019QC 58562