Under Division 275 of the Income Tax Assessment Act 1997 (dealing with the capital account election for MITs), a trust which became a MIT prior to the 2009-2010 income year has until 2 September 2010 to make the capital account election (the election). The election means that the capital gains tax (CGT) provisions have primacy in relation to the taxation of gains for many assets of a MIT. The election is irrevocable.
The election does not need to be lodged with the Australian Taxation Office (ATO).
The election can be downloaded from the ATO website by clicking here.
If the election is not made by the 2 September 2010 deadline, then the MIT will be taken to hold its otherwise qualifying assets on revenue account. This can have many flow-on implications including the inability of investors to access the CGT discount concession. Further, gains derived by foreign investors may also be brought in to the Australian tax net.
The decision whether or not a trust qualifies for making the election and the consequences of doing or not doing so need to be carefully considered.