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Schedule 5—Corporate collective investment vehicles: tax framework

Schedule 5 Corporate collective investment vehicles: tax framework

Part 1 Main amendments

Income Tax Assessment Act 1997

1  At the end of Division 195

Add:

Subdivision 195-C Corporate collective investment vehicles

Guide to Subdivision 195-C

195-100   What this Subdivision is about

The business, assets and liabilities of each sub-fund of a CCIV are taken to constitute the trust estate of a separate trust (a CCIV sub-fund trust), of which the CCIV is the trustee and the members of the sub-fund are the beneficiaries.

This Subdivision sets out further rules to facilitate the CCIV, and the sub-fund and its members, being taxed on this basis, including:

•      modifications of the rules for determining whether the CCIV sub-fund trust is a managed investment trust (under Division 275) and an attribution managed investment trust (under Division 276); and

         Note:       These modifications also affect whether the trust is a withholding MIT under Subdivision 12-H in Schedule 1 to the Taxation Administration Act 1953 .

•      rules to support the application of Division 6 or 6C of Part III of the Income Tax Assessment Act 1936 , to the extent that Division applies to the trust; and

•      rules to support the application to the trust of relevant rules about trust losses and capital gains.

Table of sections

Operative provisions

195-105    Effect of this Subdivision

195-110    Each sub-fund of a CCIV is taken to be a separate trust

195-115    A CCIV sub-fund trust is a unit trust

195-120    Beneficiary of a CCIV sub-fund trust has fixed entitlements to shares of income and capital of the trust

195-123    How to work out the income of the trust estate of a CCIV sub-fund trust for an income year

195-125    When a beneficiary of a CCIV sub-fund trust is presently entitled to trust income

195-127    When a beneficiary of a CCIV sub-fund trust has an individual interest in exempt income and non-assessable non-exempt income of the trust estate

195-130    Application of Division 275 (managed investment trusts) to a CCIV sub-fund trust

195-135    Application of Division 276 (AMITs) to a CCIV sub-fund trust

195-140    Entry on Australian Business Register

Operative provisions

195-105   Effect of this Subdivision

             (1)  This Subdivision has effect for the purposes of all * taxation laws, to the exclusion of those laws as they would otherwise apply in relation to * CCIVs and their members (in their capacity as such).

Note:          Subsection (3) excludes some taxation laws from this subsection.

             (2)  Without limiting the generality of subsection (1), the purposes referred to in that subsection include how * taxation laws apply in relation to other entities, in so far as that application is affected by the application of those laws in relation to * CCIVs and their members (in their capacity as such).

Note:          For example, in applying subsection 318(1) of the Income Tax Assessment Act 1936 to determine whether a CCIV is an associate of a natural person for the purposes of a provision affecting the income tax payable by that person:

(a)    paragraph 318(1)(d) of that Act (providing for when a trustee of a trust is an associate of the natural person) would apply; and

(b)    paragraph 318(1)(e) of that Act (providing for when a company is an associate of the natural person) would not apply.

             (3)  Subsections (1) and (2) do not apply to the following * taxation laws:

                     (a)  the Foreign Acquisitions and Takeovers Act 1975 ;

                     (b)  legislative instruments made under that Act.

195-110   Each sub-fund of a CCIV is taken to be a separate trust

             (1)  For each * sub-fund of a * CCIV, the business, * assets and * liabilities of the sub-fund are taken to constitute the trust estate of a separate trust, of which the CCIV is the trustee and the * members of the sub-fund are the beneficiaries.

             (2)  A trust that is taken to exist because of the application of subsection (1) to a * sub-fund of a * CCIV is a CCIV sub-fund trust .

Note:          The combined effect of this section and subsections 960-100(2) and (3) is that a CCIV is a different entity in its capacity as trustee of each of its CCIV sub-fund trusts.

                   Because of subsection 195-105(1), the tax treatment of the CCIV in those capacities excludes the tax treatment that would otherwise apply to the CCIV as a company. Also, the tax treatment of members of the CCIV is based on them being treated as beneficiaries of their respective CCIV sub-fund trusts, to the exclusion of the tax treatment that would otherwise apply to them as members of a company.

Example 1: CCIV A has only one sub-fund (sub-fund A). CCIV B has only one sub-fund (sub-fund B).

                   CCIV A holds shares in CCIV B. The shares are referable to sub-fund B. They are assets of sub-fund A.

                   In its capacity as trustee of the CCIV sub-fund trust for sub-fund A, CCIV A is a beneficiary of the CCIV sub-fund trust for sub-fund B.

Example 2: A CCIV has 2 sub-funds: sub-fund A and sub-fund B.

                   As permitted by section 1230Q of the Corporations Act 2001 , the CCIV acquires, in respect of sub-fund A, shares that are referable to sub-fund B. The shares are assets of sub-fund A.

                   In its capacity as trustee of the CCIV sub-fund trust for sub-fund A, the CCIV is a beneficiary of the CCIV sub-fund trust for sub-fund B.

195-115   A CCIV sub-fund trust is a unit trust

             (1)  A * CCIV sub-fund trust is taken to be a unit trust.

Note:          One consequence of this subsection is that a CCIV sub-fund trust can be a public unit trust if it meets the other tests in section 102P of the Income Tax Assessment Act 1936 .

             (2)  The * shares that are * referable to the * sub-fund are taken to be the units in the trust.

             (3)  The rights, obligations and other characteristics attaching to a unit in the trust are taken to be the same, as nearly as practicable, as the rights, obligations and other characteristics attaching to the share that is taken to be that unit.

Note:          One consequence of this section is that if shares that are referable to the sub-fund are listed for quotation in the official list of a stock exchange, the units in the sub-fund trust that those shares are taken to be will likewise be taken to be listed in that official list.

                   Examples of provisions to which this is relevant are:

(a)    paragraph 275-20(2)(a) (widely-held requirement for managed investment trusts) of this Act; and

(b)    paragraph 102P(1)(a) of the Income Tax Assessment Act 1936 (public unit trusts).

195-120   Beneficiary of a CCIV sub-fund trust has fixed entitlements to shares of income and capital of the trust

             (1)  A * beneficiary of a * CCIV sub-fund trust is taken to have a fixed entitlement to a share of income of the trust that the trust derives from time to time. At a particular time, that share is equal to the percentage worked out using the formula:

where:

beneficiary dividends is the total of the * dividends that the * beneficiary has a right to receive because of * shares that the beneficiary holds at that time and are * referable to the * sub-fund.

total dividends is the total of all * dividends that are payable on all * shares that are on issue at that time and are * referable to the * sub-fund.

             (2)  A * beneficiary of a * CCIV sub-fund trust is taken to have a fixed entitlement to a share of the capital of the trust at a particular time equal to the percentage worked out using the formula:

where:

beneficiary capital distribution is the amount of a distribution of paid-up capital (in the event of a return of capital) that the * beneficiary has a right to receive because of * shares that the beneficiary holds at that time and are * referable to the * sub-fund.

total capital distribution is the total distribution of paid-up capital (in that event) payable on all * shares that are on issue at that time and are * referable to the * sub-fund.

             (3)  A fixed entitlement that exists because of this section is taken to be a fixed entitlement within the meaning given by sections 272-5, 272-10, 272-15 and 272-40 in Schedule 2F to the Income Tax Assessment Act 1936 .

Note:          This is relevant to, for example, the definition of fixed entitlement in subsection 102UC(4) of the Income Tax Assessment Act 1936 .

195-123   How to work out the income of the trust estate of a CCIV sub-fund trust for an income year

             (1)  The income (the trust income ) of the trust estate of a * CCIV sub-fund trust for an income year is worked out in accordance with this section.

Note:          This is relevant to working out the income tax position of the CCIV sub-fund trust and its beneficiaries under Division 6 of Part III of the Income Tax Assessment Act 1936 .

             (2)  If:

                     (a)  the * CCIV is a * retail CCIV at the end of the income year; and

                     (b)  the amount of the * sub-fund’s profit for the income year, as required to be stated in the financial statements included in the financial report for the sub-fund for the income year that the CCIV is required to prepare because of paragraph 1232C(1)(a) of the Corporations Act 2001 , is greater than nil;

the trust income is that profit.

             (3)  If:

                     (a)  the * CCIV is not a * retail CCIV at the end of the income year; and

                     (b)  the amount of the * sub-fund’s profit for the income year that would, if the CCIV had been a retail CCIV at the end of the income year, be required to be stated as mentioned in paragraph (2)(b) is greater than nil;

the trust income is that profit.

             (4)  If neither of subsections (2) and (3) applies, the trust income is nil.

195-125   When a beneficiary of a CCIV sub-fund trust is presently entitled to trust income

             (1)  A * beneficiary of a * CCIV sub-fund trust is taken to be presently entitled to a share of the income of the trust estate for an income year if any of the * sub-fund’s profit for the income year was or is payable to the beneficiary by way of one or more * dividends declared during, or within 3 months after, the income year.

             (2)  That share consists of so much of that profit as was or is payable to the beneficiary by way of one or more such * dividends.

Note:          To the extent that any of that profit is not payable to a beneficiary by way of such dividends, it will be income to which no beneficiary is presently entitled. This can have consequences under section 99 or 99A of the Income Tax Assessment Act 1936 .

             (3)  Within 3 months after the end of the income year, the * CCIV must notify the * beneficiary, in the * approved form, of the following matters:

                     (a)  whether the beneficiary is presently entitled to a share of the income of the trust estate for the income year and, if so, the amount of that share;

                     (b)  for each * dividend that was declared during, or within 3 months after, the income year on * shares referable to the * sub-fund, and was or is payable to the beneficiary:

                              (i)  the amount of the dividend; and

                             (ii)  how much of the dividend consists of any of the * sub-fund’s profit for the income year.

Note:          Failure to comply with this section may constitute an offence against subsection 8C(1) of the Taxation Administration Act 1953 .

             (4)  For the purposes of this section, an amount is taken to be payable to the * beneficiary if it is required to be applied or dealt with in any way on the beneficiary’s behalf or as the beneficiary directs.

             (5)  Except as provided in this section, a * beneficiary of a * CCIV sub-fund trust is not taken to be presently entitled to a share of income of the trust estate.

195-127   When a beneficiary of a CCIV sub-fund trust has an individual interest in exempt income and non-assessable non-exempt income of the trust estate

             (1)  A * beneficiary of a * CCIV sub-fund trust:

                     (a)  is taken to have an individual interest in the exempt income of the trust estate from time to time; and

                     (b)  is taken to have an individual interest in the * non-assessable non-exempt income of the trust estate from time to time.

             (2)  The individual interest referred to in paragraph (1)(a) or (b) is the same as the share (of income that the trust derives from time to time) to which the beneficiary has a * fixed entitlement under subsection 195-120(1).

             (3)  Except as provided in this section, a * beneficiary of a * CCIV sub-fund trust is not taken to have an individual interest in the exempt income, or * non-assessable non-exempt income, of the trust estate.

195-130   Application of Division 275 (managed investment trusts) to a CCIV sub-fund trust

             (1)   This section sets out how to apply Division 275 to a trust that is a * CCIV sub-fund trust.

Determining whether the trust is a managed investment trust

             (2)  Section 275-10 has effect in relation to the trust as if the following paragraph were substituted for paragraph 275-10(3)(c):

                     (c)  at the time the payment is made, the * sub-fund is being used for collective investment by pooling the contributions of the * members of the sub-fund as consideration to acquire rights to benefits produced from those contributions; and

             (3)  In applying section 275-10 to the trust, disregard the following provisions:

                     (a)  paragraph 275-10(3)(d);

                     (b)  paragraph 275-10(3)(g).

             (4)  Section 275-10 has effect in relation to the trust as if the following paragraph were substituted for paragraph 275-10(3)(e):

                     (e)  the trust satisfies, in relation to the income year:

                              (i)  if, at the time the payment is made, the trust is covered by section 275-15—either or both of the widely-held requirements in subsection 275-20(1) and 275-25(1); or

                             (ii)  if, at the time the payment is made, the trust is not covered by section 275-15—either or both of the widely-held requirements in subsections 275-20(2) and 275-25(1); and

Determining whether the trust is a trust with wholesale membership

             (5)  In applying section 275-15 to the trust, disregard paragraph 275-15(a).

Determining whether the trust satisfies the widely-held requirements

             (6)  In applying section 275-45 to the trust, disregard paragraph 275-45(1)(d).

195-135   Application of Division 276 (AMITs) to a CCIV sub-fund trust

             (1)   This section sets out how to apply Division 276 to a trust that is a * CCIV sub-fund trust.

Determining whether the trust is an attribution managed investment trust (AMIT)

             (2)  In applying section 276-10 to the trust, disregard the following provisions:

                     (a)  paragraph 276-10(1)(b);

                     (b)  paragraph 276-10(1)(e).

Note:          The effect of disregarding paragraph 276-10(1)(e) is that the trustee of a * CCIV sub-fund trust does not have a choice as to whether the trust is an AMIT.

Trustee cannot choose to treat classes of membership interests as separate AMITs

             (3)  In applying Division 276 to the trust, disregard section 276-20.

195-140   Entry on Australian Business Register

             (1)  If a * CCIV sub-fund trust has an * ABN, the * Australian Business Registrar must enter in the * Australian Business Register in relation to the trust a statement that:

                     (a)  indicates that the trust is taken to exist for tax purposes because of the application of section 195-110 to a * sub-fund of a * CCIV; and

                     (b)  sets out the sub-fund’s ARFN (within the meaning of the Corporations Act 2001 ).

Note:          ARFN is short for Australian Registered Fund Number.

             (2)  The * Australian Business Registrar must take reasonable steps to ensure that information entered in the * Australian Business Register under this section is accurate. For this purpose, the Registrar may correct or update the information.

2  Subsection 703-20(2) (after table item 3)

Insert:

4

A company

The company is a * CCIV at any time during the income year

3  Subsection 703-20(2) (at the end of the table)

Add:

8

A trust

The trust is a * CCIV sub-fund trust

4  At the end of section 703-20

Add:

             (3)  Item 8 of the table in subsection (2) of this section has effect despite section 713-130 (which enables a public trading trust to form a consolidated group).

International Tax Agreements Act 1953

5  Subsection 4(2)

Omit “Part IVA of the Income Tax Assessment Act 1936 ”, substitute “the provisions covered by subsection (3)”.

6  At the end of section 4

Add:

             (3)  This subsection covers the following provisions:

                     (a)  Part IVA of the Income Tax Assessment Act 1936 ;

                     (b)  Subdivision 195-C (Corporate collective investment vehicles) of the Income Tax Assessment Act 1997 .

Part 2 Consequential amendments

A New Tax System (Australian Business Number) Act 1999

7  Paragraph 26(3)(g)

After “section 30-229”, insert “or 195-140”.

Income Tax Assessment Act 1997

8  Section 9-1 (after table item 3)

Insert:

3A

A company that is a corporate collective investment vehicle (CCIV)

Subdivision 195-C

3B

The trustee of an attribution managed investment trust (AMIT)

sections 276-405 to 276-425

9  Section 9-5 (after table item 1)

Insert:

1A

The trustee of an attribution managed investment trust (AMIT) is liable to pay income tax on certain amounts reflecting under-attribution of income or over-attribution of tax offsets

sections 276-405 to 276-425

10  Subsection 995-1(1)

Insert:

asset , of a * sub-fund of a * CCIV, means any of the assets of the sub-fund, ascertained in accordance with Subdivision B of Division 3 of Part 8B.5 of the Corporations Act 2001 .

beneficiary , of a * CCIV sub-fund trust, means a * member of the * sub-fund who is taken because of subsection 195-110(1) to be a beneficiary of the trust.

CCIV : see corporate collective investment vehicle .

CCIV sub-fund trust has the meaning given by subsection 195-110(2).

corporate collective investment vehicle or CCIV has the same meaning as in the Corporations Act 2001 .

11  Subsection 995-1(1) (definition of fixed entitlement )

Repeal the definition, substitute:

fixed entitlement :

                     (a)  an entity has a fixed entitlement to a share of the income or capital of a company, partnership or trust if the entity has a fixed entitlement to that share within the meaning of Division 272 in Schedule 2F to the Income Tax Assessment Act 1936 ; and

                     (b)  despite paragraph (a) of this definition, a * beneficiary of a * CCIV sub-fund trust is taken to have a fixed entitlement to a share of the income or capital of the trust as provided by section 195-120 of this Act.

Note:          Section 165-245 of this Act affects when an entity is taken to have held or had, directly or indirectly, a fixed entitlement to a share of income or capital of a company.

12  Subsection 995-1(1)

Insert:

liability , of a * sub-fund of a * CCIV, means any of the liabilities of the sub-fund, ascertained in accordance with Subdivision C of Division 3 of Part 8B.5 of the Corporations Act 2001 .

13  Subsection 995-1(1) (at the end of the definition of member )

Add:

             ; and (f)  in relation to a * sub-fund of a * CCIV—means a person who is, under subsection 1222Q(3) of the Corporations Act 2001 , a member of the sub-fund.

14  Subsection 995-1(1)

Insert:

referable : a * share in a * CCIV is referable to a * sub-fund of the CCIV if it is so referable under subsection 1230(1) of the Corporations Act 2001 .

retail CCIV has the meaning given by subsection 1222J(1) of the Corporations Act 2001 .

sub-fund , of a * CCIV, has the meaning given by subsection 1222Q(1) of the Corporations Act 2001 .

Part 3 Amendments consequential on enactment of the Commonwealth Registers Act 2020

Income Tax Assessment Act 1997

15  Subsection 195-140(1)

Omit “the * Australian Business Registrar must enter in the * Australian Business Register in relation to the trust”, substitute “the * Registrar must make a record of”.

16  Paragraph 195-140(1)(b)

Repeal the paragraph, substitute:

                     (b)  sets out:

                              (i)  the sub-fund’s ARFN (within the meaning of the Corporations Act 2001 ); and

                             (ii)  the name of the * corporate director of the CCIV; and

                            (iii)  the number of the corporate director’s Australian financial services licence (within the meaning of that Act).

17  Subsection 195-140(2)

Repeal the subsection, substitute:

             (2)  The * Registrar must take reasonable steps to ensure that a statement recorded under subsection (1) is accurate. For this purpose, the Registrar may correct or update the record of the statement.

18  Subsection 995-1(1)

Insert:

corporate director of a * CCIV has the same meaning as in the Corporations Act 2001 .

19  Application of amendments

The amendments made by this Part apply to a CCIV sub-fund trust that has an ABN, even if the trust began to have an ABN before the commencement of this Part.