Proposed Constitution Amendments Attribution Managed Investment Trust Regime (AMIT)

Transcription

1 Proposed Constitution Amendments Attribution Managed Investment Trust Regime (AMIT) 20 June 2018 IMPORTANT INFORMATION This notice informs investors in the managed investment schemes listed below (Funds) of which Ironbark Asset Management (Fund Services) Limited (Ironbark) ABN AFSL acts as Responsible Entity that: Subject to eligibility, Ironbark has decided to opt-in to the AMIT Regime from 1 July 2017; and Ironbark will amend the Constitutions of the Funds to facilitate their operation under the AMIT regime. Ironbark would generally need to hold an investors meeting in order to make any material change to the Constitution. Given that this change will affect a large number of managed investment schemes, the Australian Securities and Investments Commission (ASIC) has granted relief for holding such a meeting, providing notice is given to investors to explain the changes. This relief is granted under ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489. What is the AMIT Regime? AMIT is a significant industry-wide reform, which introduces new tax rules for Funds. The new rules are intended to reduce complexity, provide flexibility, increase certainty and minimise compliance costs for Funds and their investors. Under the current tax regime, the net (tax) income of a Fund is allocated to investors based on the investor s proportionate share of the income of the trust to which they are presently entitled. Under the AMIT regime, investors will be assessed on the taxable income (characters) that it is attributed to them by a Fund on a fair and reasonable basis, irrespective of the amount distributed. The AMIT regime is optional. Where Ironbark does choose to make the AMIT election, it applies irrevocably to the Fund for any year that the Fund qualifies as an eligible AMIT. Key Features and Benefits Some of the key features and potential benefits include: Reduced complexity and increased certainty on tax treatment of distributions and the character of income and capital of the Fund. Statutory codification of the unders and overs industry practice. This means if there is a difference between the amount that should have been attributed to members and what was actually attributed, the variance can be attributed to the year it is discovered. This also means that the tax statements should not need to be reissued to members, who may have otherwise had to amend their tax returns. It also allows for a timelier distribution and tax reporting process. Deemed fixed trust treatment, which can hold potential benefit for members such as; flow through of franking credits, utilisation of tax loses and access to foreign resident capital gains tax concession. A comprehensive system of cost base adjustments for units in an AMIT which has the potential to avoid any double taxation. Adjustment include upward cost base adjustments where the taxable income attributed to a member exceeds the amount distributed.

2 More flexibility in the administration process including the ability to accumulate income without tax penalty and obtain an upward cost base adjustment. The ability to create separate classes of units in an AMIT which can be treated as separate AMITs for the purpose of calculating and attributing taxable income to members. How will the AMIT Regime change the tax position of the Funds and their members? Under the AMIT regime, taxable income will be attributed to members on a fair and reasonable basis, having regard to the members rights under the relevant Fund Constitution. As a member you will still be taxed on your share of the Fund s taxable income, however there is greater flexibility in the way each members tax position is determined than a non-amit. Will the new regime impact the Funds Distribution policy? At this time, there are no changes to the Funds distribution policies as a result of the adoption of the new AMIT regime. However, we will continue to review the operation of the Funds under AMIT regime and will notify members of any changes to the existing distribution policies. What impact will the new regime have on my Annual Tax Statement? Following the adoption of AMIT, your annual tax statement will be known as an AMIT Member Annual Statement ( AMMA Statement ). Your AMMA Statement will contain slight changes in terminology and some additional fields such as AMIT cost base adjustments. Fund Constitutions Amendments The proposed changes to be made to the Fund Constitution to allow the responsible entity to effectively operate the Funds under the AMIT regime. Details of the proposed amendments can be found in the Summary of Changes to Constitutions Table. List of Impacted Funds Fund ARSN Ironbark Royal London Concentrated Global Share Fund Ironbark Denning Pryce Global Tailored Income Fund Ironbark Paladin Property Securities Fund Ironbark Copper Rock Global All Cap Share Fund Ironbark Copper Rock Emerging Markets Opportunities Fund AMS Balanced Fund AMS Moderately Conservative Fund Ironbark Karara Australian Share Fund Ironbark Karara Australian Small Companies Fund Ironbark Gavekal Asian Opportunities Fund

3 Fund ARSN Ironbark LHP Diversified Investments Fund Ironbark LHP Global Long/Short Fund Ironbark Global (Ex-Australia) Property Securities Fund Ironbark Global Property Securities Fund Omega Global Corporate Bond Fund Omega Global Listed Infrastructure Fund Ironbark Global Diversified Alternatives Fund Electing to Opt-in to the AMIT regime Ironbark has decided to opt-in to the AMIT regime for each of the Funds listed, subject to the relevant qualification conditions being satisfied. In making this decision Ironbark has considered a range of factors, including the benefits discussed above. When will the change take effect? Ironbark intends to make the changes to the Constitutions shortly after this notice has been advertised to members for at least 7 days. A number of the amendments only operate for the year in which the Funds are treated as an AMIT for tax purposes. Which Funds are impacted? The proposed changes to the Constitutions will apply to the Funds listed above, regardless of whether the Trust is eligible to elect into the AMIT regime. Investors with Ironbark who are members of other Funds of which Ironbark is the responsible entity should note that either the Constitution of the fund already contains the provisions now being incorporated into the Funds listed in this notice or are not considered to be eligible to elect to adopt the AMIT provisions at this time. What do investors need to do? Ironbark will modify the relevant Constitution as proposed, unless it receives requests within 7 days from the date of this notice from investors with at least 5% of the votes that may be cast, to call and arrange to hold a meeting of the relevant Fund s investors. Should Ironbark within 7 days after this notice receive requests to call and arrange a meeting of investors form investors with at least 5% of the votes that may be cast on the resolution of the meeting, it will call a meeting of investors. You will receive notice of a meeting, in writing if this is required. If you wish to request a meeting of the Fund s investors, your request must: Be made in writing; Include: o Your full name o The name of your Fund; 3

4 o Your Investor ID; and Be sent to Summary of Changes to the Constitutions A summary of the Constitution amendments to the applicable Funds is set out in the below table: Amendment AMIT Powers Attribution and Distributable Income AMIT Indemnity Member Objections Description of Amendment Providing Ironbark with certain powers to allow for appropriate application and compliance with the AMIT Regime. This includes the power elect for the Funds to be AMITs; Where the Fund falls outside certain statutory safe harbours there will be a limitation of Ironbark powers to ensure the Fund satisfies the Clearly defined interest requirement to be an AMIT. Ironbark is required to attribute the tax components of the Funds to members where the Funds are AMITs, and provide for how this attribution will be undertaken. Please see below for further information; Funds will be able to adapt the existing default definition of income to concepts used within the AMIT regime, this will provide greater flexibility to how income is determined to reflect the flexibility provided for under the AMIT regime; Ironbark is permitted to accumulate income where the Funds are AMITs. This removes the requirement of the Funds to distribute all the taxable income of the Fund and allow for the ability to obtain upward cost base adjustments in this event under the AMIT regime; Description of how tax components for any amounts of accumulated income will be attributed to members under the AMIT regime; Allow Ironbark the right the right to attribute particular tax components of the Fund to members who exercise a Significant Redemption of units within the financial year that the Funds are AMITs. This reflects the specific power provided to Ironbark under the AMIT regime to undertake attributions of tax components to exiting members; The adoption of the definition of Distributable Amount to reflect the new powers described above, including the ability to accumulate income and also the power to attribute taxable components to a member who exercises a significant redemption ; The power of Ironbark to require a member or former member to provide an indemnity in respect of any tax liability incurred by Ironbark under the AMIT Regime; The Responsible Entity indemnity for AMIT-related taxes allows Ironbark to deduct amounts paid or payable to any member or former member; Extend Ironbark s existing limitation of liability where the trustee has exercised the powers under the AMIT regime. This includes the trustee s dealings with unders and overs in accordance with the AMIT regime; Provide clauses on how objections by members to the attribution of tax components to them under the AMIT regime will be dealt with. It also states how Members are required to indemnify the trustee for any cost incurred through the handling of member objections. This inclusion is to ensure the appropriate and efficient administration of the Funds and limit 4

5 Amendment Non-AMITs preserving existing Provisions Description of Amendment the potential adverse impact on other members where such objections are made. Modified the existing income and distribution provisions of the Constitutions to include clauses that cater for the AMIT regime. This means that the operation of the existing income and distribution provisions are preserved where the Funds are not an AMIT. Need further information? We are here to help. If you would like further information please contact our Client Services team on or 5