Taxation Considerations
Taxation Considerations
The summary Australian taxation information contained in this document is a general guide in relation to the Australian taxation implications applicable to the Fund for Australian resident investors who hold their units in the Fund on capital account.
The summary reflects the income tax legislation in force, and the interpretation of the Australian Taxation Office and the Courts, as at the date of issue of this document. Further, as the Australian tax laws are subject to continual change, the summary should not be relied upon as a complete statement of all the potential tax considerations which may arise upon investing in the Fund.
The Trustee, as the Trustee of the Fund, does not expect to be subject to Australian income tax (including CGT) in relation to the Fund, as it is intended that Unitholders will be presently entitled to all of the distributable income of the Fund in respect of each financial year.
Unitholders will be subject to tax on their share of the tax net income of the Fund, in proportion to their entitlement to the distributable income of the Fund, in the year in which their entitlement arises, irrespective of whether the income is distributed in cash after year-end or reinvested in the Fund.
Unitholders may be entitled to franking credits that arise from franked dividends received in respect of the Fund’s investment in Australian shares. Subject to various eligibility criteria, including the holding period rule, Unitholders can use the credits to reduce the tax liability on their share of the tax net income of the Fund or other assessable income. Excess franking credits may be refundable to resident individuals and complying superannuation entities, and in certain circumstances may give rise to tax losses for companies.
The Trustee does not provide tax advice. As the tax treatment applicable to particular investors may differ, it is strongly recommended that investors seek advice from a suitably qualified adviser as to the Australian taxation implications (including capital gains tax (CGT) and Goods and Services Tax) of their proposed investment in the Fund.
Subject to satisfying the eligibility requirements to be an MIT for deemed CGT treatment, the Fund may make the MIT deemed CGT election. Where the election is made, and subject to the Fund continuing to qualify as an MIT, the Fund would hold its eligible assets (including equities, and units in other trusts, but excluding derivatives and foreign exchange contracts) on capital account.
Where the Fund does not meet the MIT eligibility criteria, the Trustee endeavors to invest, divest and deliver returns in a manner consistent with holding investments on capital account for the purposes of the Income Tax Assessment Act (ITAA) 1997.
Realized capital gains distributed by the Fund should be included with an investor's other capital gains and losses. Capital gains distributed by the Fund should benefit from the discount available for assets held for 12 months or more. The amount of the discount is one-half for individuals and trusts, and one-third for complying superannuation entities. Distributions of non-assessable amounts or returns of capital may give rise to reductions in the investor's tax cost base in the Fund or a capital gain if the tax cost base has been exhausted by such distributions received earlier.
If Unitholders redeem, switch, or transfer any part of their investment in the Fund, it is generally treated as a disposal, and Unitholders may be subject to CGT.
The Fund may derive income from sources outside Australia. A Unitholder's share of the gross foreign income will be treated as foreign income for that Unitholder. Unitholder's may be entitled to a foreign income tax offset for any foreign tax paid by the Fund on the income.
The TOFA rules may apply to certain “financial arrangements” held by the Fund, such as derivatives. In broad terms, in calculating the net (taxable) income of the Fund, returns on certain financial arrangements may be recognized on an accruals basis rather than a realization basis, and on revenue account. The Tax advisor of the Fund will assist the Trustee with compliance with the TOFA rules, as required by the tax legislation.
The Fund is registered for GST. The issue or redemption of units in the Fund and where applicable the receipt of any distributions are not subject to GST.
The Fund may be required to pay GST included in certain fees, charges, costs, and expenses incurred by the Fund. However, to the extent permissible, the Trustee will claim on behalf of the Fund a proportion of this GST as a reduced input tax credit.
To the extent that the Fund is investing in international securities, the Fund may be entitled to as yet undetermined additional input tax credit on the fees, charges or costs incurred. If the Trustee is unable to claim input tax credits on and/or reduced input tax credits on behalf of the Fund, the Trustee retains the ability to recover the entire GST component of all fees and charges.
Unitholders should seek professional advice with respect to the GST consequences arising from their investment in the Fund.
Australian investors may notify us of their TFN, ABN (provided they are investing in the course of conducting an enterprise), or their exemption status. In the event that we are not notified of the details, the tax may be deducted from gross payments including distributions of income at the highest marginal tax rate, including the Medicare Levy, until such time as the relevant TFN, ABN or exemption is provided. The collection, use, and disclosure of your TFN will be in accordance with the tax laws and the Privacy Act.
The investor may be able to claim a credit in the investor's tax return for any TFN/ABN tax withheld. By quoting their TFN or ABN, the investor authorizes the Trustee to apply it in respect of all the investor’s investments with the Trustee. If the investor does not want to quote their TFN or ABN for some investments, the Trustee should be advised.
Non resident investors (if any) may have tax deducted from each distribution comprising of Australian sourced income at the relevant withholding tax rates. Withholding tax should not apply to the franked dividend component of distributions. Further, non-resident investors will not be subject to tax in respect of their share of net capital gains in respect of assets of the Fund that do not constitute taxable Australian property.
The comments noted above are based on the taxation legislation and administrative practice as at the issue date of this document. However, it should be noted that the Australian tax system is in a continuing state of reform, and based on the Government's reform agenda, reform is likely to escalate rather than diminish.
Any reform of a tax system creates uncertainty, whether it be uncertainty as to the full extent of announced reforms or uncertainty as to the meaning of new law that is enacted pending interpretation through the judicial process.
It will be necessary to monitor the progress of the reforms, and it is strongly recommended that investors seek their own professional advice, specific to their own circumstances, of the taxation implications of investing in the Fund.
The Foreign Account Tax Compliance Act (US) (FATCA) relates to US taxpayers and the Common Reporting Standard (CRS) is a broader framework for the exchange of financial account information between jurisdictions relating to all non-Australian taxpayers.
We are required to collect information about your tax status in order to comply with Australian laws to implement Australia's obligations under FATCA and CRS, which are regimes for the exchange of financial account information by Australia with foreign jurisdictions.
To comply with FATCA and CRS, as a financial institution, we must collect information about your tax status before opening your account and we are required to identify foreign accounts and provide information relating to foreign accounts and foreign controlling persons to the Australian Taxation Office. The Australian Taxation Office may then pass this information to other revenue authorities under the exchange of information agreements that Australia has entered into with other jurisdictions. We cannot provide tax advice about the impact or compliance obligations of FATCA and CRS on you or your business activities.
If you do not provide this information, we may not be able to process your application. We encourage you to seek advice from a tax adviser if you are uncertain about what steps you need to take.