17 December 2014 EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. • Copy into your web browser: http://www.ey.com/GL/en/ Services/Tax/InternationalTax/Tax-alert-library#date Global Tax Alert Australian Government announces tax plans impacting the asset management industry and financing Australian entities investing overseas On 15 December 2014, the Australian Treasurer released the 2014-15 Mid-Year Economic and Fiscal Outlook (MYEFO). The MYEFO announcements included changes to the taxation of managed investment trusts, the investment manager regime and the deductibility of interest on debt used to fund non Australian subsidiaries. Managed Investment Trusts Certain minor changes to the proposed managed investment trust (MIT) tax reforms are confirmed and the start date is still listed as 1 July 2015. These changes are proposed to: • Better target the arm’s length rule to transactions most likely to give rise to tax integrity risks • Better target the circumstances in which an administrative penalty for a breach of the new “unders and overs” rules may apply and reduce the compliance costs of remedying the breach The MIT measure will also clarify the treatment of tax deferred distributions paid by MITs from 1 July 2011 to legislate the longstanding industry treatment, that they are not taxed as ordinary income. The Australian Taxation Office (ATO) will also be prevented from making related amendments to assessments for earlier periods. It is also proposed to treat foreign life insurance companies as a specified “white list” entity for the purposes of the MIT widely held test with effect from 1 July 2014. arrangements in Australia will now apply from the 2015-16 income year with an option for investors to apply the legislation from the 201112 income year. Treasury is working on the drafting of the MIT law changes with a public exposure draft scheduled for release in early 2015. This delay likely reflects that Treasury is re-drafting the law after having received significant consultation input on the earlier draft law. The optional early start also appears to recognize that the IMR3 drafting will correct some gaps in the current investment Investment manager regime The MYEFO announced that the investment manager regime tranche 3 (IMR3) proposals for a tax exemption on the gains of widely held foreign funds that have invested in certain financial 2 manager regime legislation, which are potentially significant for some inbound investors. Global Tax Alert Financing Australian entities investing overseas The Government will not proceed with a previously announced measure to deny the ability of Australian entities to claim interest deductions on debt used to fund non-Australian subsidiaries. The Government had previously announced that it would consider introducing a more targeted anti-avoidance measure than that announced by the previous government, however, the latest announcement means this measure will not go ahead at all. For additional information with respect to this Alert, please contact the following: Ernst & Young (Australia), Sydney • Daryn Moore +61 2 9248 5538 • Michael Anderson +61 2 8295 6991 • Sean Monahan +61 2 8295 6226 • Antoinette Elias +61 2 8295 6251 [email protected] [email protected] [email protected] [email protected] Ernst & Young (Australia), Melbourne • Peter Janetzki +61 3 8650 7525 [email protected] Ernst & Young (Australia), Adelaide • Janet Finlay +61 8 8417 1717 [email protected] Ernst & Young (Australia), Brisbane • Paul Laxon +61 7 3243 3735 [email protected] Ernst & Young (Australia), Perth • Craig Robson +61 8 9429 2271 [email protected] Ernst & Young LLP, Australian Tax Desk, New York • Andrew Nelson +1 212 773 5280 [email protected] Global Tax Alert 3 EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2014 EYGM Limited. All Rights Reserved. EYG No. CM5023 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com