Arm's length income rule for MITs

Under the new tax system for MITs, the arm's length income rule was introduced in the context of the repeal of Division 6B of the Income Tax Assessment Act 1936 (which taxed certain public unit trusts as corporate entities).This new rule removes the incentive to shift profits from an active business of a related party to a MIT by engaging in non-arm’s length activity.

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If we determine that a MIT has derived non-arm’s length income, the trustee may be liable to pay income tax on that income at the standard corporate tax rate of 30%.

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    Last modified: 06 Oct 2016QC 47436