Technical changes to IMR and MIT rules

The Minister for Revenue and Financial Services has announced technical changes that will improve the operation of the Investment Manager Regime (IMR) and tax rules for Managed Investment Trusts (MITs). These changes remove tax uncertainty that was threatening to limit the intended operation of the regimes and in turn, frustrate the Government’s policy to position Australia as a regional financial centre.

In respect of the IMR, the Government has clarified that when a foreign investor invests in Australia through a foreign fund or an independent Australian fund manager, it will be in the same tax position as if it had invested directly. Consultation will be conducted on whether a legislative amendment is required to ensure that the engagement of an Australian independent fund manager will not cause a fund that is legitimately established and controlled offshore to be an Australian resident.

In relation to MITs, the proposed technical changes are to remove some barriers to entities seeking to opt into the regime and will clarify the operation of the law. They include measures affecting the application of the MIT withholding tax provisions and the interactive outcomes with the Capital Gains Tax (CGT) rules.

Refer to PwC Australia’s TaxTalk Alert for further details.

Foreign resident capital gains withholding

Following the enactment of the Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017, which increased the withholding rate to 12.5 per cent and reduce the withholding threshold for real property to AUD750 000 under the foreign resident capital gains withholding regime, the Australian Taxation Office (ATO) has issued the following updates to the Law Companion Guidelines:

·       LCG 2016/5A1 - Addendum: Foreign resident capital gains withholding regime: the Commissioner’s variation power

·       LCG 2016/6A1 – Addendum: Foreign resident capital gains withholding regime: amount payable to the Commissioner, and

·       LCG 2016/7A1 – Addendum: Foreign resident capital gains withholding regime: options.

Some tax thresholds and figures for 2017-18

The ATO has issued the following updates to certain annual thresholds or ‘safe harbour’ amounts relevant for the 2017-18 financial year:

·       TD 2017/18 which states that the depreciation car limit is AUD57,581

·       TD 2017/19 which indicates the amounts that the Commissioner considers are reasonable for the substantiation exception for the 2017-18 income year in relation to claims made by employees for overtime meal expenses, domestic and overseas travel expenses for accommodation, food and drink, and incidentals when travelling away from home overnight, and

·       TR 2017/2 which sets out the Commissioner’s determination of the effective life of depreciating assets from 1 July 2017.

Effective life reviews

The ATO is undertaking a review of the effective lives of assets used in the following industries:

·       gas and oil mining support services

·       wholesaling

·       banking industry

·       scientific testing and analysis services

The ATO expects to complete its review of these assets within 12 months, with the new effective life determinations applying from 1 July 2018.

IGT Review into ATO’s Fraud Control Management

The Inspector General of Taxation (IGT) has announced that he has accepted the Senate Economics References Committee’s request to examine how the ATO addresses the risk of fraud and associated issues. The Committee’s request follows recent events including those relating to Operation Elbrus and allegations of tax fraud that may be linked to abuse of position by a public official. For further information, refer to the review’s terms of reference. Submissions were due by 28 July 2017.

Review of the Petroleum Resource Rent Tax

The Government has released its interim response to the Review of the Petroleum Resource Rent Tax (PRRT), and requested Treasury undertake further consultation to inform its final response. To assist with the consultation process, Treasury has released a consultation paper which considers options to address the design issues raised in the review. Submission on that paper were due by Friday 28 July 2017. The information obtained through this latest consultation is planned to be used to develop options for reforming the PRRT. Treasury is expected to report back to Government by the end of September 2017.

Productivity Commission research paper on Rising Protectionism

The Productivity Commission has released a paper which outlines a strategy that would help achieve better outcomes for all Australians and foster public confidence in open markets. The Paper models a set of scenarios based on possible new trade policies in the United States (US) (including increased US tariffs and border adjustments made under a new US corporate tax system) and seeks to identify their implications for Australia.