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Re: How to qualify as a Managed Investment Trust

Devotee

Views 259

Replies 7

Hi community, please assist me with the below doubts.

 

These doubts are related to  the ATO guidance on managed investment trusts .

 

Reference :  https://www.ato.gov.au/general/trusts/in-detail/managed-investment-trusts/managed-investment-trusts-... 

 

Q 1  The term 'Persons' has been used in explaining  the closely held restriction.

       Does  the term 'Persons' refers only to individual investors or does it's definition cover all other types of investor entities as well ? (companies, SMSFs, etc) 

 

Q2  The term 'Members' has been used in explaining the 'Widely Held Requirement'.

       Does the term 'Members' refers to all types of investors or does its definition cover only a specific class of investors ?

 

Q3 Does members and persons mean the same in this context ?  

 

     If possible, please direct me to a reference that contains definitions for the above terms.

 

Q4 Given below is an extract from a non ATO source (back in 2016) which refers to it as the third condition to be satisfied under MIT rules .

 

Investment management activities in relation to the trust should be carried out largely in Australia in respect of Australian assets

 

Is the above condition still valid ? I can no longer see it under QC 47436 , although it is stated in QC 23757 as an amendment introduced in 2010.

 

If  the condition is still valid , is there a particular reason for it to be excluded  from the list of conditions under QC 47436 ?

 

Thanks a lot.

 
1 ACCEPTED SOLUTION

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Most helpful response

ATO Community Support

Replies 2

Hi @Joachim

 

Under the dictionary (s995-1) of the Income Tax Assessment Act (ITAA) 1997, our definition of person is an individual or a company, but no other entities.

 

Under s960-130 of ITAA 1997, we define a member as a beneficiary, unit holder or object of the trust, and for public trading trusts it is only the unit holder of the trust. This means they must fall into one of these categories to be deemed as a member.

 

This means that they don't mean the same thing, though there can definitely be an overlap in some - or many - situations.

 

We don't have an answer yet for your last question, but we're looking into it, so hold tight for us on it. Smiley Happy

 

You can read section 995-1 and section 960-130 of the ITAA 1997 on our legal database.

7 REPLIES 7

Most helpful response

ATO Community Support

Replies 2

Hi @Joachim

 

Under the dictionary (s995-1) of the Income Tax Assessment Act (ITAA) 1997, our definition of person is an individual or a company, but no other entities.

 

Under s960-130 of ITAA 1997, we define a member as a beneficiary, unit holder or object of the trust, and for public trading trusts it is only the unit holder of the trust. This means they must fall into one of these categories to be deemed as a member.

 

This means that they don't mean the same thing, though there can definitely be an overlap in some - or many - situations.

 

We don't have an answer yet for your last question, but we're looking into it, so hold tight for us on it. Smiley Happy

 

You can read section 995-1 and section 960-130 of the ITAA 1997 on our legal database.

Devotee

Replies 0

Hi @BlakeATO Thanks a lot for the help. 

Devotee

Replies 0

Hi @BlakeATO 

 

Please assist.(when time permits)

 

Per (s995-1) person  includes a company.

 

But within (s995-1), I could not find any reference that suggests it does not include any other entity.

 

Please refer to the below  which defines a person as an individual but also includes a company or other entity that is considered a person for legal purposes . ( It could be because it concerns a  different area of taxation).

 

https://www.ato.gov.au/business/small-business-entity-concessions/eligibility/definitions/ 

 

Question: Assume that one of the beneficiaries of an MIT is a trust with a corporate trustee. 

 

(a) Is the Trust eligible to be considered as a person for the closely held requirement?

 

(b) Would there be a change if the trustee of the trust was an individual?

 

Thank you

 

ATO Community Support

Replies 1

Hi @Joachim

 

"Person" in the meaning of managed investment trust - section 275-10 of ITAA 1997 is defined by the definition of ITAA 1997, which is where my referenced definition was taken from.

 

Where our legislation does not define terms further, we use the common term to understand its meaning. This means an individual human. Therefore, we can assume that it refers to individuals and companies only.

 

Therefore a trust won't qualify, even if the trustee is an individual.

 

Thanks for your patience on the answer for question 4 on your original post. Here's what we found under 275‑10 (3) of ITAA 1997: A trust is covered under this subsection in relation to an income year if ... at the time the trustee of the trust makes the first fund payment in relation to the income year, or at an earlier time in the income year:

  • (i)  the trustee of the trust was an Australian resident; or
  • (ii)  the central management and control of the trust was in Australia.

 

This means that while the management activities do not have to be conducted in Australia, it's going to be far easier to satisfy one of these conditions if they are.

 

You can read section 275-10 of ITAA 1997 on our legal database.

Devotee

Replies 0

@BlakeATOThanks a lot for the detailed explanation.

ATO Community Support

Replies 1

Hi @Joachim 
 
Thanks for being patient. Our team has found some more information for you regarding question 4. 
 
The general MIT eligibility requirements don't specify where investment management must be done. But it's more detailed for the MIT to receive reduced withholding rates. To be a withholding MIT, it must meet section s12-383 of the Taxation Administration Act (TAA) 1953:
 
(b) a substantial proportion of the investment management activities carried out in relation to the trust in respect of all of the following assets of the trust are carried out in Australia throughout the income year:
 
(i) assets that are situated in Australia at any time in the income year;
(ii) assets that are * taxable Australian property at any time in the income year;
(iii) assets that are * shares, units or interests listed for quotation in the official list of an * approved stock exchange in Australia at any time in the income year.
 
This is covered by another section of QC 47436, under Withholding for MITs.
 
You can read the TAA 1953 on the Federal Register of Legislation.

Devotee

Replies 0

@BlakeATO Thanks very much