Attribution Managed Investment Trust (AMIT) Tax Regime

Transcription

1 Attribution Managed Investment Trust (AMIT) Tax Regime Investment Wrap and SuperWrap Frequently asked questions (FAQ) June 2017 Overview of this FAQ This FAQ is for Adviser use only to address any enquiries in response to the AMIT changes affecting the Wrap platform for the 2016/17 financial year. If you have any questions not covered in this FAQ or you come across a question you can t answer, please contact your Business Development Manager. Contents Overview of this FAQ... 1 PART 1 INTRODUCTION What is the Attribution Managed Investment Trust (AMIT) regime? Why has the AMIT regime been introduced? What are the main differences between the AMIT regime and the existing tax regime? What is the expected effect of the AMIT regime on investors for the 2016/17 financial year? Which Funds have elected into the AMIT regime? Do the AMIT changes apply to Investment and Super? What if I have questions not covered in this FAQ?... 4 PART 2 WHAT DO YOU NEED TO KNOW? What are the implications of the new regime for the provision of advice? What changes have been made to investors Annual Tax Statements in response to the AMIT regime? How will I know which of my clients are invested in an AMIT fund? Will the AMIT changes affect the timing of my clients 2016/2017 Tax Statements? How do I know when to expect my clients Tax Statements to be completed? Are there any changes to Data Downloads as a result of the AMIT regime? Are there any changes to our Desktop Reports as a result of the AMIT regime? Where can I go for more information?... 7 PART 3 WHAT DO YOUR CLIENTS NEED TO KNOW? What does the AMIT regime mean for your clients? How do your clients know if they have been allocated income not paid in cash? Are there any changes to your clients Tax Statements? Is withholding tax applicable to income that isn t distributed in cash?

2 PART 4 WHAT ARE BTFG MANAGED FUNDS DOING IN REGARD TO THE AMIT REGIME? Have eligible BTFG managed investment funds elected into the AMIT regime? What does the switch to being an AMIT fund mean for investors in BTFG managed investment funds? Which BTFG managed investment funds will become AMIT funds?

3 PART 1 INTRODUCTION 1.1 What is the Attribution Managed Investment Trust (AMIT) regime? The Attribution Managed Investment Trust regime (AMIT regime) is a new taxation system for eligible managed investment trusts, introduced by the Government in May If an eligible managed investment trust (Fund) elects to opt in to the new tax rules, the Fund becomes an Attribution Managed Investment Trust (AMIT fund) for tax purposes. If a Fund doesn t opt in, the current tax rules continue to apply. It is expected that the majority of managed investment funds within Australia will become AMIT funds from 1 July 2017, however, we are aware that some managed investment funds have already opted in to the AMIT regime and this may have tax consequences for investors who held investments in these funds in the 2016/2017 financial year. 1.2 Why has the AMIT regime been introduced? The AMIT regime is intended to increase certainty around the taxation treatment of eligible managed investment trusts and reduce compliance costs for both funds and investors. It was designed over a number of years with industry collaboration and is expected to remove some of the inefficiencies and administrative burden currently experienced with the existing tax treatment. The AMIT regime requirements are technical in nature and include, but are not limited to: the ability to attribute income to investors; greater clarity around the tax treatment of tax-deferred and tax-free distributions; and the ability to adjust the cost base of investors units up or down, where cash distributions are less than or greater than the amount attributed to investors What are the main differences between the AMIT regime and the existing tax regime? The most significant change in the new regime is the departure from the present entitlement model of trust taxation. Instead, AMIT funds will determine investors share of income and capital on an attribution model. The following table outlines the main differences between the AMIT regime and the existing tax regime (as set out in Division 6, Part III of the Income Tax Assessment Act 1936). AMIT regime Taxable income, including realised net capital gains and tax credits (if any), is attributed to investors on a fair and reasonable basis, having regard to investors rights as set out in the Fund s Constitution. An AMIT fund may choose not to pay some or all of its attributed income in cash. This means an investor s assessable income may differ from the cash distributions they receive. Investors are subject to tax on the total amount of income attributed to them including any income not paid in cash. Existing Managed Investment Trust regime Taxable income is assessable to investors on a present entitlement basis ie based on their proportionate share of distributions. Cash corresponding to taxable income is generally distributed in full (or reinvested). Investors are subject to tax on the income of the Fund in proportion to the amount that is distributed to them each financial year. Note: income distributed in a financial year can be less than the assessable income for the year. 3

4 AMIT regime An investor s cost base may be adjusted up or down. Generally, any difference between the amount of income attributed to an investor and the amount of cash distributed will cause an adjustment to the investor s cost base. The AMIT fund must issue an AMIT member annual statement (AMMA statement), advising investors of the amount of income attributed to them and any cost base adjustments ( cost base net increase amount or cost base net decrease amount ). Existing Managed Investment Trust regime An investor s cost base may only be adjusted down eg for tax-deferred income. The Fund issues a Distribution Statement to investors detailing the components of income distributed. 1.4 What is the expected effect of the AMIT regime on investors for the 2016/17 financial year? The AMIT regime will not affect the majority of investors for the 2016/2017 financial year. Only investors who held an investment in a Fund that opted in to the AMIT regime in 2016/2017 will be affected. See Q3.1 What does the AMIT regime mean for your clients? Some changes have been made to investors Tax Statements to facilitate reporting on AMIT funds. See Q2.2 What changes have been made to investors Annual Tax Statements in response to the AMIT regime? 1.5 Which Funds have elected into the AMIT regime? You can find our current list of funds that have advised they elected into the AMIT regime in the 2016/2017 financial year on the Year-end microsite at wrapinfo.com.au/eofy. We won t know if other Funds elected into the AMIT regime in the 2016/2017 financial year until we start receiving each Fund s Tax Statement, issued between 1 July 2017 and 30 September We ll track this information and regularly update the list for you. 1.6 Do the AMIT changes apply to Investment and Super? Yes, both Investment Wrap and SuperWrap may have investments in AMIT funds. 1.7 What if I have questions not covered in this FAQ? If you have any questions not covered in this FAQ, or you come across a question you can t answer, please contact your Business Development Manager. PART 2 WHAT DO YOU NEED TO KNOW? 2.1 What are the implications of the new regime for the provision of advice? In the short term, you need to be aware of the AMIT regime and the possible effect on your clients Annual Tax Statements for the financial year ending 30 June In the long term, you need to consider how the changes affect your clients investment choices, based on each client s individual circumstances. Under the AMIT regime, investors are taxed on the income attributed to them by the AMIT fund. Attributions must be made on a fair and reasonable basis. We expect the most significant effect of the AMIT regime for the provision of advice to be the ability of an AMIT fund to make attributions that are not paid in cash. For your clients reliant on 4

5 cash income for example, some Funds may be more suitable than others, depending on each Fund s intention to make attributions not paid in cash. The AMIT changes do not affect current commission structures. 2.2 What changes have been made to investors Annual Tax Statements in response to the AMIT regime? Investors Annual Tax Statements have been modified to ensure they include: any income attributed to an investor by an AMIT fund (whether paid in cash or not) and the applicable tax components; and adjustments to an investor s Cost base of AMIT fund units, as advised by an AMIT fund if applicable. Any capital gains and losses will be based on this adjusted cost base. Specifically, any attributions not paid in cash will be included in the following Tax Statement sections: Tax Statement Summary ; Trust distributions summary - Schedule C by security; and Trust distributions detail - Schedule C by security and ex-distribution date. Net capital gains from distribution will also include any attributions not paid in cash that are applicable to this component. Any cost base adjustments advised by an AMIT fund will be included in the Cost base adjustments shown in the: Net Capital Gains Schedule D ; and Unrealised Gains / Losses schedule. Please note, the Cost base adjustments amount will also continue to include any tax-free, tax-deferred and/or CGT-concession amounts. The Tax Guides will provide more information about the changes to Tax Statements. The Wrap Tax Guides for the 2016/2017 financial year will be available in July 2017 and can be accessed: via the Adviser Desktop; at investorwrap.com.au/wrap/taxguides; or by calling Customer Relations on Investors Annual and Quarterly Statements are not affected by the AMIT changes as these are cash-based reports. 2.3 How will I know which of my clients are invested in an AMIT fund? Please refer to Q1.5 Which Funds have elected into the AMIT regime? to access a list of funds that have elected into the AMIT regime in the 2016/2017 financial year. We won t know if other Funds have elected into the AMIT regime, or if any AMIT funds have attributed any income not paid in cash to investors for the 2016/2017 financial year, until we start receiving each Fund s Tax Statement for processing. Statements will be received between 1 July and 30 September We will track this information and provide updates, including an updated list of AMIT funds, to you throughout the year-end period on the Year-end microsite at wrapinfo.com.au/eofy. To look up whether any of your clients have investments in an AMIT fund, you can: 1. Login to the Adviser Desktop > Select Reports under My Business > Select Security Holders. 5

6 2. Key in the Distribution date for the AMIT fund in the As at box. 3. Key in the AMIT fund APIR/ASX Code in the Security Code box. 4. Click on Show Report to obtain a list of clients invested in the AMIT fund. <A list of clients invested in the AMIT fund will show here> 6

7 2.4 Will the AMIT changes affect the timing of my clients 2016/2017 Tax Statements? To produce investors Annual Tax Statements there are a number of steps we need to follow to ensure the accuracy of the information investors receive. An individual s Tax Statement can only be produced once we receive the necessary tax information from every managed investment fund and/or listed security that the investor held in the financial year, regardless of the size of their holding. At this stage, we do not anticipate any changes to the timing of the production of investors Tax Statements as a result of the AMIT changes. Updates will be provided throughout the year-end statement period if necessary. For more information on the Wrap Tax Statement Process, please refer to the Wrap Year End Adviser Guide found on the Adviser Resources page of the Year-end microsite at wrapinfo.com.au/eofy. 2.5 How do I know when to expect my clients Tax Statements to be completed? The Wrap Year-end microsite is your one-stop shop for all things relating to year end. The Year-end microsite can be accessed via the Adviser Desktop or directly at wrapinfo.com.au/eofy. The Year-end microsite will provide updated information on statement tranches and a list of Funds we have received information for and those that are still outstanding. We will also provide an up-to-date list of Funds that we know have elected into the AMIT regime in 2016/17. You can also access a comprehensive set of frequently asked questions, copies of Tax Guides and sample statements, as well as a page dedicated to accounting partners. It s important that you check the Year-end microsite regularly as information contained in the Wrap Year End Adviser Guide is subject to change and the Year-end microsite will be the core of all year-end activity. To help manage your clients expectations around when their Tax Statements are expected to be ready, you can use the online Estimator Tool, available on the Year-end microsite. The Estimator Tool calculates an approximate Tax Statement delivery date for each investor based on information received from fund managers and share registries. It s a guide only and subject to change as more information is received over the year-end reporting period, so it should be checked on a regular basis. 2.6 Are there any changes to Data Downloads as a result of the AMIT regime? To enable you to better support their accounting partners or utilise various software programmes themselves, Wrap provides the ability to download clients Tax Statement information. Any income attributed by an AMIT fund to an investor (whether paid in cash or not) for the 2016/17 financial year will be included in the investor s Tax Statement. Likewise, any income and the applicable tax component information will flow through and be included in the Data Downloads. You can refer to the Data Download Q&A on the Adviser Desktop for further information. 2.7 Are there any changes to our Desktop Reports as a result of the AMIT regime? The following Desktop Reports have been modified to facilitate reporting for AMIT funds: Estimated Realised Tax Gains and Losses; and Estimated Unrealised Tax Gains and Losses. Within these reports, the Cost base of AMIT fund units may be adjusted as advised by the AMIT fund, if applicable. The Cost base is in turn used to calculate Gains/Losses shown in the report. Estimated gains and losses shown on the Investment Order screen are also based on the adjusted Cost base. 2.8 Where can I go for more information? You can find answers to frequently asked questions, Tax Guides and more on the dedicated Wrap Year-end microsite at wrapinfo.com.au/eofy. This site is a one-stop shop for all things year end and will contain the latest updates and information to assist you. 7

8 If you have any questions not covered in this FAQ, they can contact their Business Development Manager, call one of our Wrap consultants on , Monday to Friday between 8.00am and 6.30pm (Sydney time), or PART 3 WHAT DO YOUR CLIENTS NEED TO KNOW? 3.1 What does the AMIT regime mean for your clients? If your client is invested in a Fund that elects to become an AMIT fund they should be aware that: The AMIT fund will attribute income to them. Income attributed may include both cash and amounts not paid in cash to them. This means the amount of cash received (or reinvested) may be less than the total amount of income attributed to them. Income attributed to them will form part of their assessable income for tax purposes. This is the case regardless of whether the income is distributed to them in cash. The cost base of their investment in an AMIT fund will generally increase by the amount of any income attributed, but not paid in cash to them (this is so your client is not taxed twice on this amount). Information about the amount of income attributed to your client and any adjustments to their cost base will be included in their Annual Tax Statement for the applicable financial year. 3.2 How do your clients know if they have been allocated income not paid in cash? If, during the 2016/2017 financial year, your client was invested in an AMIT fund, any income attributed to them (whether paid in cash or not), will be included in their Annual Tax Statement. See Q3.3 Are there any changes to your clients Tax Statements? 3.3 Are there any changes to your clients Tax Statements? If your client held an investment in an AMIT fund, their Annual Tax Statement, including the Tax Summary and supporting schedules, will include income attributed to them by the AMIT fund (whether paid in cash or not) and the applicable tax components. Importantly, investors in an AMIT fund should note that: Any income attributed to them which is not paid in cash will NOT be shown separately on their Tax Statement. The amounts shown on their Tax Statement will be the total amount attributed to them ie whether paid in cash or not. Any amounts not paid in cash will be allocated between the various components of income as advised by the AMIT fund. The tax they pay will depend on the composition of the income on their Tax Statement. The income components may include dividends, interest, realised capital gains and tax credits. The Cost base shown on their Tax Statement will be adjusted by the cost base adjustment amount, if any, advised by the AMIT fund. Any capital gains and losses reported in their Tax Statement are based on this adjusted 'Cost base. Some minor changes to labels and footnotes have been made to all of your clients Tax Statements. The Tax Guide, available from Investor Online, will address these changes in detail. Your clients receiving a PAYG Statement should be aware that capital gains and losses shown on this statement will also be based on the adjusted Cost base. Your clients Annual Statements and Quarterly (PS148) Statements are not affected by the AMIT changes as these are cash-based reports. 8

9 3.4 Is withholding tax applicable to income that isn t distributed in cash? Yes, withholding tax is applicable to the total amount of income attributed to an investor, including any income not paid in cash. Withholding tax applies to investors that are NOT Australian residents for tax purposes or have not provided a valid Tax File Number (TFN). Any withholding tax is deducted from the investor s working cash account. For non-residents, the applicable rate of tax depends on the type of income and the investor s country of residence for tax purposes. For SuperWrap Personal Super Plan, attributed income is treated as earnings and taxed accordingly. Our systems and processes have been updated to cater for this. For SuperWrap Non-Commutable Pension Plan (transition to retirement pension) attributed income is treated as earnings and from 1 July 2017 will be taxed accordingly. As Pension accounts remain tax-exempt, they are not affected by the AMIT changes. PART 4 WHAT ARE BTFG MANAGED FUNDS DOING IN REGARD TO THE AMIT REGIME? 4.1 Have eligible BTFG managed investment funds elected into the AMIT regime? Eligible BTFG managed investment funds (BTFG funds) are expected to elect into the AMIT regime, effective 1 July Changes have been made to each BTFG fund s Constitution to allow the applicable Responsible Entity to: elect into the AMIT regime; treat a class of units in the BTFG fund as a separate AMIT fund; and ensure the practical application of the AMIT regime. A notice about the BTFG funds election into the AMIT regime will be provided to investors with their Annual Statements. A copy of a notice is included below. 9

10 Important notice of taxation changes On 5 May 2016, a new tax regime applying to Managed Investment Trusts (MIT s) (also known as Managed Investment Schemes or MIS s) was established under the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act Additional legislation (the Attribution Managed Investment Trust (AMIT) regime) was also enacted. The new regime allows managed funds that meet certain requirements to make an irrevocable choice to be an AMIT. Some of the AMIT regime requirements are quite technical in nature and include, but are not limited to, the following: Greater clarity around the tax treatment of tax-deferred and tax-free distributions; The ability to treat a class of units in each managed fund as a separate AMIT; The ability to attribute income to investors in each AMIT; and The ability to make cost base (value) adjustments to an investor s units in an AMIT either up or down where distributions are greater or less than the amount on which the investor is taxed. Why has the AMIT regime been introduced? The intention of the AMIT regime is to reduce complexity and increase certainty around the taxation treatment of MITs. In the best interests of investors, BT Funds Management Limited, BT Funds Management No. 2 Limited and Westpac Financial Services Limited (Responsible Entities) have decided to elect eligible managed funds (Funds) into the AMIT regime on 1 July In order to do this, the relevant Fund Constitutions have been amended and specifically provide for the ability to elect into the AMIT regime and for the regime to apply thereafter, as well as providing for the necessary powers to ensure practical application of the AMIT regime. What will the AMIT regime mean for you? Broadly, an AMIT will attribute its taxable income to investors on a fair and reasonable basis, having regard to the members rights under the relevant Fund constitution. The AMIT should generally not be subject to income tax. Income attributed to you may form part of your assessable income regardless of whether the income is distributed to you in cash. For each year ending 30 June, an AMIT will send to you a member statement, detailing member components of assessable income, capital gains, tax credits and any other relevant tax information to be included in your tax return. If you have elected to receive a part or all of your distributions from a Fund in cash, we will continue to pay cash distributions until we notify you otherwise. If you have elected to reinvest your distributions, your distributions will continue to be reinvested. We recommend you seek professional taxation advice should you wish to understand how the AMIT regime may impact your personal circumstances. 4.2 What does the switch to being an AMIT fund mean for investors in BTFG managed investment funds? Eligible BTFG managed investment funds (BTFG funds) are expected to become AMIT funds from 1 July This means there will be no changes to the tax arrangements for these BTFG funds, or for investors, for the 2016/2017 financial year. If a BTFG fund receives attributed income not paid in cash from an external fund for the 2016/17 financial year, it will be converted to cash and distributed to investors in the applicable BTFG fund. 4.3 Which BTFG managed investment funds will become AMIT funds? Click here for a list of BTFG managed investment funds that are expected to become AMIT funds from 1 July

11 Important Information This communication may contain financial product advice and has been prepared for use by advisers only. It must not be made available to any retail client and any information in it must not be communicated to any retail client. This information has been prepared without taking account of any client s objectives, financial situation, or needs. Because of this, each client should, before acting on this information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any tax position described is a general statement and is for guidance only. It does not constitute tax advice and is based on current tax laws and our interpretation. 11