Senate

Tax Laws Amendment (2010 Measures No. 1) Bill 2010

Tax Laws Amendment (2010 Measures No. 1) Act 2010

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)
Amendments to be moved on behalf of the Government

Chapter 1 - Amendments 1 to 7 to Schedule 3 - Managed investment trusts: capital treatment and taxation of carried interests

Explanation of amendments

Amendment 1

1.1 Amendment 1 removes sections 275-5 and 275-10 of item 4 in Schedule 3 to the Tax Laws Amendment (2010 Measures No. 1) Bill 2010. These provisions would have treated certain widely held trusts (including certain wholesale trusts and certain Government-owned entities) in the same way as a managed investment trust (MIT).

1.2 Broadly, as a consequence of Amendment 1, an Australian resident trust will be a MIT if it meets the general definition of 'managed investment trust' in Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) or will be treated in the same way as a MIT if every member of the trust is a MIT.

1.3 Trusts that would have been treated in the same way as a MIT under the removed provisions will now be covered by proposed changes to the general definition of 'managed investment trust' in Subdivision 12-H of Schedule 1 to the TAA 1953, to be introduced into Parliament at a later date.

Amendment 4

1.4 Amendment 4 removes section 275-25 of item 4 in Schedule 3 to the Tax Laws Amendment (2010 Measures No. 1) Bill 2010. Under proposed section 275-25, a trust would not have been treated in the same way as a MIT in relation to an income year, if it was a closely held trust at any time during the income year.

1.5 As a consequence of Amendment 1 a 'closely held' test in relation to trusts that are treated in the same way as a MIT is no longer required. Such a test is to be incorporated with the proposed changes to the general definition of 'managed investment trust' in Subdivision 12-H of Schedule 1 to the TAA 1953, to be introduced into Parliament at a later date.

Amendments 2, 3, 5, 6 and 7

1.6 These amendments make minor technical corrections to Schedule 3.

1.7 Amendments 2 and 3 replace paragraphs 275-15(1)(b) and 275-20(b) and (c) in item 4 of Schedule 3. As a consequence of these amendments the provisions will refer to a trust being 'treated in the same way as a MIT' through the operation of Subdivision 275-A of the Income Tax Assessment Act 1997 .

1.8 Amendments 5 and 7 replace references to 'year of income' with 'income year' in paragraphs 275-110(1)(a) and (b) in item 4 of Schedule 3.

1.9 Amendment 6 inserts 'of Part III' after 'Division 6C' in paragraph 275-110(1)(b) in item 4 of Schedule 3.


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