The Government has issued exposure draft legislation that will provide for a final withholding tax rate of 10% on fund payments from eligible Clean Building Managed Investment Trusts (MITs) made to foreign residents in information exchange countries.

The MIT final withholding tax rate that applies to fund payments from a MIT to a foreign resident, including where made indirectly through one or more Australian intermediaries is currently 30% reducing to 15% where the recipient is a resident in an information exchange country (previously 15% reducing to 7.5% but the rates were increased from 1 July 2012).

Therefore there is a substantial tax concession offered to foreign investors who invest in MIT that in turn invest in clean buildings. Basically, a building will be a clean building if:

  • the construction of its foundations began on or after 1 July 2012;
  • the building is a commercial building that is used for office, hotel and shopping centre purposes; and
  • the building meets and maintains at least a 5 Star Green Star rating as certified by the Green Building Council of Australia or a 5.5 star Energy Rating as accredited by the National Australian Built Environment Rating System (NABERS).