Distributions

AMIT

What is an Attribution Managed Investment Trust (AMIT)?

An AMIT is a managed investment trust that has chosen to apply the new AMIT regime. Managed investment trusts include most listed trusts and other widely held trusts.

What is the AMIT regime?

The Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (the Act), which establishes a new tax system for managed investment trusts (MITs), received Royal Assent on 5 May 2016. The new rules apply from 1 July 2016.  Prior to the commencement of the AMIT regime, family trusts and large managed investment trusts were subject to the same set of tax laws. Many aspects of these laws were uncertain and difficult for managed investment trusts to apply in practice and resulted in unnecessary administration costs.

The AMIT regime provides a specific set of rules that are intended to provide greater flexibility in the operation of AMIT’s tax affairs and to reduce administration costs.

Under the current tax regime, the net income of a Fund is allocated to unit holders based on the unit holder’s proportionate share of the income of the Fund to which they are ‘presently entitled’.  Under the AMIT Regime, unit holders will be taxed on the taxable income that is “attributed” to them by a Fund on a “fair and reasonable” basis.  Under this approach a Fund can attribute an amount of taxable income to unit holders that is greater than the cash paid.

At this stage, FIML intends to continue with its current distribution policy and will attribute a Fund’s taxable income in the same manner as under the previous trust taxation regime which is in proportion to the cash distributed to each unit holder.

The AMIT regime will not change the overall manner in which FET’s income is taxed or change the way in which investors complete the tax return. Consistent with the previous trust taxation regime:

• FET itself will not be subject to tax;
• an Australian resident FET unitholder will include their share of FET’s taxable income in their assessable income for the year to which the income relates (not the year in which it is received);
• withholding tax will be deducted from distributions to non-resident FET unitholders; and
• investors will include the different components of their share of FET’s taxable income in the same tax return labels.

Why is FET electing to opt-in to the AMIT Regime?

FIML has decided to elect for the AMIT Regime to apply to the Fund commencing from 1 July 2017 for the following reasons:

• Elimination of a number of areas of uncertainty in the existing laws;
• Tax status of Fund – The AMIT Regime deems the tax status of FET to be a “fixed trust” providing certainty to the Fund to be eligible for certain tax concessions such as offsetting trust losses;
• Prescriptive treatment of under or over-distributions of taxable income (“overs” or “unders”) of a Fund which will reduce the requirement to amend prior year tax returns previously lodged; and
• Prevention of double taxation – The AMIT Regime provides the ability to make upward cost base adjustments to Fund units where cash distributions are less than the taxable income attributed to unit holders.  In the absence of this, unit holders may be taxed twice on certain amounts attributed to them.

When does the AMIT regime start?

Managed investment trusts can choose to be AMITs with effect from the year ended 30 June 2016 or any later year.  FET has elected to become an AMIT for the year ended 30 June 2018. FET will be an AMIT for all subsequent years as the election is irrevocable.