Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 1 - Restructuring of certain managed investment schemes
A new legal structure for investment funds
1.1 From 1 July 1998, the provisions of the Corporations Law changed significantly for certain investment funds. The most fundamental change was the replacement of a funds dual structure of trustee and manager with a single responsible entity performing most of the roles previously undertaken by the trustee and manager. Restructuring the investment fund to a single responsible entity structure removes the dual structures inherent problems of divided powers and responsibilities along with the related legal complexity and uncertainty. Investment funds that adopt a single responsible entity structure under the Corporations Law are described as registered managed investment schemes.
Taxation Relief
1.2 Schedule 2of Taxation Laws Amendment Act (No. 7) 1999 (TLAA 7) made amendments to the Income Tax (Transitional Provisions) Act 1997 to provide:
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- schemes with relief from unintended tax consequences arising from a managed investment scheme (the scheme) restructuring to become a registered scheme in accordance with the Managed Investments Act 1998 (MIA); and
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- schemes with relief from unintended taxation and administrative consequences arising from certain changes that are not strictly required by the MIA; and
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- members of such schemes with relief from unintended taxation consequences arising from the replacement of their interest in the scheme with an interest in the registered scheme.
1.3 However, these measures only provided relief to members if they were members just before the first qualifying change and just after the last qualifying change their scheme makes to its structure.
1.4 The amendments in this Bill will provide further taxation relief to eligible members of a scheme which undertakes more than one change to its structure during the time allowed for restructuring under the MIA.
Summary of the amendments
1.5 The purpose of these amendments is to provide taxation relief to a person who either becomes a member or ceases to be a member of a scheme that makes more than one qualifying change to its structure.
1.6 The proposed amendments will be effective from 1 July 1998 the same date the measures in TLAA 7 became effective.
Explanation of the amendments
1.7 The amendments made in TLAA 7 provided relief to a member of a scheme from any unintended taxation consequences resulting from the scheme restructuring in accordance with the MIA. Relief was only available if a person was a member of a scheme immediately before and immediately after all the changes to the scheme.
1.8 Items 1 and 2 will extend this relief to a member of a scheme that makes more than one change during the restructuring period. They achieve this by providing relief to a person who is a member of a scheme immediately before and immediately after a particular change to the scheme.