49 th WESTERN AUSTRALIA STATE CONVENTION
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1 49 th WESTERN AUSTRALIA STATE CONVENTION Written by: Kathryn Utting Director PricewaterhouseCoopers Presented by: Kathryn Utting Director PwC Grace Stevens Consultant PricewaterhouseCoopers August 2016 Novotel Vines Swan Valley Resort Kathryn Utting 2016 Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax Institute did not review the contents of this paper and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.
2 CONTENTS 1 Overview Stapled Securities Overview A common stapled structure in the infrastructure industry Infrastructure Industry Overview Commercial basis for stapled structures Increased flexibility in distributing cash to investors Flow-through taxation treatment Flexibility of investment structure Trapped Franking Credits Optimisation of Project Finance Investor preference for pre-tax income Other benefits of utilising a trust flow through structure Recent developments and issues in the infrastructure industry ATO Focus and Activity The Infrastructure Framework FIRB and the ATO Negative Control Thin capitalisation Kathryn Utting
3 1 Overview Stapled structures are used quite extensively in Australia one of the few jurisdictions globally where they are utilised. They primarily feature in the Australian real estate investment and infrastructure industries, as well as being used by the four major banks. At the end of 2011, 15 out of 18 listed infrastructure funds and 28 out of 49 listed A-REITs had stapled security structures 1. The major banks have utilised stapling in the construction of tier one capital instruments, such as StEPS (issued by ANZ) and PERLS (CBA). The increased presence of stapled structures in the Australian infrastructure market is correlated with the growth of infrastructure investments over the last couple of years. This growth has been spurred by various factors including: The rise in Government asset sale processes to privatise assets in recent years; and Government provided tax incentives, financing arrangements and other measures which encourage private-sector investment in public infrastructure projects to assist governments in delivering public services in a revenue constrained environment. The aim of this paper is to provide a broad overview of the infrastructure sector and a typical stapled structure used by the sector. This paper explores the tax and commercial issues related to a staple structure commonly employed, which generally involves the stapling of the securities of a property trust and an operating company. The objective of this paper is to demystify infrastructure and stapling concepts for readers whom do not deal with such concepts regularly. This paper will explore at a high level what a stapled security is and the characteristics of infrastructure investments that lend themselves to the use of such structures. The commercial basis for the use of a commonly employed staple structure in the infrastructure sector will then be explored, with a focus on how the tax outcomes of such a structure can assist in achieving investors commercial objectives. Lastly this paper will discuss some of the current topical tax issues facing the infrastructure sector, with an exploration of recent ATO activity and areas of scrutiny within the industry. 1 Davis, Kevin. FRDP : Why Stapled Securities? [online]. Australian Centre for Financial Studies Financial Regulation Discussion Paper Series, 4 June Availability: stapled-securities-frdp-3.pdf. Kathryn Utting
4 2 Stapled Securities 2.1 Overview A stapled structure exists where investors own two or more securities which are generally related and bound together contractually. They are created when two or more related securities are contractually bound together so that the securities cannot be bought or sold separately. In order for securities to be stapled across different entities, some form of contractual relationship must exist between the entities whose securities are being stapled. Even though stapled securities are bound together, each of the individual securities within the staple retains its legal character and there is no variation to the rights or obligations (for example, dividends, capital rights and voting) attaching to the individual securities. Likewise, where the stapling occurs across securities of different entities, the stapling does not impact the independent nature of each of the underlying entities and their day-to-day activities. However, stapled securities must be dealt with as a whole - individual securities that are stapled cannot be traded separately. Where two separate entities staple their securities, generally a stapling agreement is entered into and stapling provisions are embedded into the constituent documents of each entity which will generally cover various things including: The joint issue of new stapled securities by the entities; That the securities cannot be disposed of separately; and When and how the stapling may be undone. Stapled securities can arise in a couple of ways including: 1. An entity can staple their different types of securities (i.e. debt securities and shares); 2. Securities of two separate but related entities can also be stapled. This is generally the method of stapling used in the infrastructure and real estate investment sectors. 2.2 A common stapled structure in the infrastructure industry In an infrastructure context, securities from two separate but associated entities are usually stapled. These two entities would typically be a unit trust and a related company - the trust holds the infrastructure property assets and leases these to the related company, who carries out the management and operation of the property and pays rent to the trust. The securities to be stapled are the units in the trust and the shares in the associated company. An investor holding an infrastructure stapled security will therefore be the holder of a unit in a unit trust and a share in a company. Kathryn Utting
5 This structure tends to look like this: Investors Op Co Rent Lease Property Trust Stapling Agreement Business Assets Property Assets Chattels Contracts Employees Land Fixtures Note that this structure will most likely include a Holding Trust above Property Trust and a Hold Co/Hold Trust above Operating Co to give greater security to financiers (they will take security of the share/units in the Operating Co and Trust) Kathryn Utting
6 3 Infrastructure Industry 3.1 Overview In the infrastructure investment industry, private investors such as superannuation funds, pension funds and infrastructure funds provide their investors the opportunity to invest in public infrastructure projects, such as toll roads, airports and rail facilities. Investing in this industry is generally attractive for investors because of the long duration of infrastructure projects and the reasonably predictable returns that they provide. As a result of the value of funds currently pursuing infrastructure investment (in 2012, Australian super funds had a pool of over US$1.62 trillion in funds under management, the third largest in the world and the largest in Asia 2 ), infrastructure asset prices have risen and returns have compressed for investors. There are numerous recent examples of this including: In April 2014, both the Port of Newcastle and Port Botany and Kembla were sold for circa 25 times current year earnings. 3 In February 2014, Global Infrastructure Partners, a New York based infrastructure fund, disposed of a stake in the Port of Brisbane for circa 28 times current year earnings. 4 In March 2015, the Indiana Toll Road in the United States was bought by Industry Funds Management Investors, an Australian investment manager, at 32 times price earnings. 5 Along with domestic fund growth, the amount of foreign investors interested in Australian infrastructure projects has also risen. Foreign investors have taken advantage of Australia s Managed Investment Trust (MIT) regime, with foreign investment via MITs almost doubling from $20.3 billion to $40.4 billion over the 12 months to 31 December Investor s positive experiences in infrastructure, along with greater competition, has led to interest in less traditional infrastructure-type assets, including: Agribusiness assets particularly primary production assets such as crops; and Trading businesses particularly where there is a significant property component. 2 Landsberg, Stuart and Scott, Hayden. Alternative asset classes and flow-through taxation [online]. Taxation in Australia, Vol. 50, No. 4, Oct 2015: Availability: < ISSN: Hastings wins Port of Newcastle in $1.75bn deal, Australian Financial Review, 1 May Eye-popping port precedent has focus on Vic, The Australian, 24 February Toll road sale means world is nuts, Australian Financial Review, 16 March Australian Investment Managers Cross-Border, Financial Services Council and Perpetual, Kathryn Utting
7 Some examples of expansion in these asset areas include the APA Group s acquisition of the Queensland Curtis LNG export pipeline for US$5bn in December 2014, 7 and Canada s Public Sector Pension Investment Board s investment into the Hewitt Cattle Company in April There are very few variables that can influence the price paid for an infrastructure investment because revenue is generally regulated. This factor, combined with the highly competitive nature of the infrastructure asset market and competition from non-traditional type assets, means that efficient structuring of infrastructure investments is vital. 3.2 Commercial basis for stapled structures An infrastructure project usually involves the following characteristics: Large capital requirements either to build, or acquire, significant physical assets; Long-term physical assets which have lives in excess of 30 years; Committed / regulated revenue streams from diverse sources and / or Government; Relatively immaterial ongoing operational costs; and Monopolistic and / or regulated returns, meaning the opportunity for higher user charges are available but limited through regulation. The commonly used staple structure summarised in 2.2 above is advantageous in the infrastructure industry as it has multiple commercial benefits (in comparison to other business structures i.e. company structures). The structure allows investor s return on investment requirements to be satisfied, whilst working within the commercial boundaries of such investments as outlined above. These commercial benefits are explored below Increased flexibility in distributing cash to investors In the stapled structure, investors can receive distributions from both the company and the trust. This is beneficial for an investor because in a pure company structure, in an infrastructure investment context, receiving distributions of spare cash can be a difficult process. This arises due to the particular characteristics of infrastructure investments. As mentioned above, infrastructure projects are long term investments that recover capital costs over a long period. Cash available for distribution to investors from the project typically exceeds accounting profits in the early years of a project s life. As a result of the solvency and net asset requirements which bind companies under the Corporations Law, the distribution of operating cash by way of dividend by a company in the absence of accounting profits is difficult and cumbersome. 7 BG Group agrees sale of Australian pipeline for US$5 billion, BG Group, 9 December Canada s Public Sector Pension Investment Board Buys Mccamley s Cattle Stations, Australian Financial Review, 16 April Kathryn Utting
8 Stapled securities are therefore advantageous to investors because trusts are much more flexible in allowing available investor cash flows to be distributed to beneficiaries prior to the recognition of accounting profits from the project, which may not eventuate for some time Flow-through taxation treatment Trusts are generally flow-through entities for tax purposes (unless they are public trading trusts or corporate unit trusts). This means that the income the trust receives (in the infrastructure context, rental payments from its related company) is not subject to company tax, broadly as long as it is all paid out to the unit holders. Rather tax is paid at the investor level depending on their individual tax circumstances. In a stapled structure, this benefits both the company and the trust as rental payments paid by the company to the trust enables it to reduce its taxable income and company tax paid, whilst increasing the income of the trust (on which company tax is not paid but individual investors themselves are taxed at their own marginal rates). Legislative changes introduced by Government have continued to incentivise investors to utilise flowthrough vehicles. For example, the MIT regime has been progressively developed to provide greater certainty and synergies for investors and with the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 receiving Royal Assent on 5 May 2016, this certainty has been further bolstered. The Act provides greater certainty for investors by a variety of measures including allocating trust net income by attribution, rather than present entitlement and providing certainty on withholding payments and deemed capital gains tax treatment (by election) Flexibility of investment structure An infrastructure investment fund may have numerous minority interests in multiple infrastructure investments, which themselves have differing investment structures subject to different tax analysis. However, to maintain flow-through treatment for tax purposes, many funds must not control another entity that conducts a trading business 9. Accordingly, an investment fund s structure must be flexible enough to allow the fund to continue to hold these minority interests, regardless of the underlying investment structure, whilst still retaining its flow through taxation status. Flow through taxation status is achieved if the trust only engages in an eligible investment business (EIB), which includes the activities of investing in land for the primary or sole purpose of deriving rent and investing / trading in any or all of specifically listed financial instruments. 10 With a stapled security structure, this flexibility is achieved as the trust undertakes EIB (derives rental income) from the leasing of assets to the related operating company (which undertakes the trading business). The stapled structure allows ownership of underlying investments to be split between the stapled entities such that the EIB status of the trust can be maintained, allowing the fund to participate 9 Division 6C of the Income Tax Assessment Act 1936 (discussed in more detail below) 10 Income Tax Assessment Act 1936 (Cth) s 102M. Kathryn Utting
9 in most investment opportunities, without the trust contravening the control rules and therefore preserving flow-through tax treatment Trapped Franking Credits As discussed above, infrastructure investments are generally characterised by their long term, capital intensive nature with significant investment occurring in the earlier years of an infrastructure project. This means that generally there are no accounting profits made in the early years of the project out of which to pay dividends. Coupled with this, infrastructure projects in the construction phase generally have a large pool of carry forward tax losses. These losses exist because of events such as construction-phase interest deductions being expensed for tax purposes (but capitalised in the accounts), the amortisation of upfront transaction costs such as debt/equity raising costs for tax and the ramp up of user charges for some projects in the early years of operations. These mismatches between accounting and tax recognition times mean that the sole use of a company for infrastructure project investment purposes may be inefficient. It is likely that franking credits will be trapped in the company as there is a mismatch between accounting profits arising and tax payments made on the project due to the utilisation of carried forward tax losses (the deduction of non-cash tax deductions such as capital works deductions in the company further exacerbates this mismatch). Financial models associated with infrastructure projects typically show that tax is paid in the later years of a project. It is at this time when franking credits will be generated and can be used to frank dividend distributions however, there may have been many years before this when franking credits were not available despite the availability of accounting profits from which to pay dividends. With the use of a trust which is a flow-through entity, cash distributions can be made earlier in the project life to investors regardless of the existence of franking credits. Investors then can pay tax in their own hands on the trust distributions at their marginal tax rates. The use of a staple allows better alignment between free cash flows, accounting profits and tax payments in the company (which give rise to franking credits) Optimisation of Project Finance With significant competitive tension in the infrastructure investment market, investors must maximise the price they are willing to pay to participate in infrastructure projects which compresses margins on projects and investor returns. The use of project financing for investments is therefore paramount to maximising return on investment for such projects, due to the comparatively cheaper costing of debt capital to equity capital. Lenders to infrastructure projects evaluate a project s debt service coverage ratios (DSCR) for the purposes of sizing and pricing the project debt. In calculating the DSCR for a company, the base calculation focuses on post-tax income. However, in the case of a flow-through entity such as a trust, as the lenders security is generally over the units in the trust, and tax is paid in the hands of the investor rather than by the trust, the DSCR does not include taxes paid on the net income of the trust. By removing the tax costs from the security net, greater leverage is generally available for the project funding and better debt terms can be negotiated. This overall lower cost of debt funds increases the return on equity, thereby enabling investors to justify a higher equity bid price in a competitive market. Kathryn Utting
10 3.2.6 Investor preference for pre-tax income Historically, returns on a fund manager s performance have been calculated by reference to pre-tax returns. This means fund managers have traditionally favoured investments that yield a higher pretax return over a similar investment that has a lower return, but attaches a tax credit. A trust s flow through nature means that fund managers are able to distribute pre-tax income to investors. This leads to a wider pool of equity investors which enables infrastructure investments to compete with traditional alternate forms of investment (such as real estate and bonds/fixed interest). The advent of post-tax fund manager reporting and refundable franking credits have however substantially reduced the importance of this factor in utilising stapled structures Other benefits of utilising a trust flow through structure There are obvious tax incentives to utilising a trust structure which are not limited to the infrastructure sector, which include: Where assets held by a trust are sold, a CGT discount is generally available. This can be quite beneficial given the value of infrastructure assets. There is an MIT 15% concessional withholding tax regime for non-residents and deemed capital treatment available for covered assets for MIT s. This makes investment into infrastructure MITs more attractive for both Australian and non-resident investors. As discussed previously, the recent enactment of the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 has further bolstered certainty in the application of the MIT rules for investors. 3.3 Recent developments and issues in the infrastructure industry ATO Focus and Activity The Infrastructure Framework Given the importance and prevalence of privatisations and infrastructure investments in Australia at the moment, the ATO has announced publicly in its Large Business Focus for year 11 publication that it will focus on infrastructure and Public Private Partnerships (PPP) transactions. In order to investigate concerns around the privatisation of public infrastructure, the ATO is in the process of drafting the Infrastructure Australian federal tax framework 12 and has established a dedicated infrastructure team. The aim of the team is to address risks in infrastructure investments before transactions that involve them are implemented by early engagement with stakeholders. To 11 Available at: / 12 Available at: Australian-federal-tax-framework/ Kathryn Utting
11 assist this process, the Infrastructure Australian federal tax framework is being drafted and released in stages. The stated aim of the ATO is to: Work collaboratively with industry and state government to: maximise certainty about the way we administer the law; ensure that the tax system is administered in a sensible and pragmatic way (to the extent the law allows); provide assurance to the federal government that an appropriate amount of tax is collected from these transactions; and minimise the compliance costs of bidders, operators and state governments. The framework forms part of the implementation of these objectives. The framework is intended to provide stakeholders with guidance on issues that are relevant to the infrastructure industry and states: This framework sets out our overall position on standard-form infrastructure and privatisation transactions. It outlines what we see as the most common infrastructure and privatisation transactions, and considers how we see the Australian tax system applying to them. This approach from the ATO accords with their more recent approach to provide guidance to taxpayers to allow them to swim between the flags, with audit resources dedicated to those taxpayers who do not. Two chapters in the document have already been released around PPPs and privatisations (draft chapter released for consultation). Two more chapters are forthcoming and will cover other infrastructure related issues and the ATO s compliance focus. In the newly released draft chapter of this publication (which covers privatisations and has been released for consultation only at this stage), the ATO has directly recognised the use of stapled structures in the infrastructure industry. Specifically the ATO acknowledges in the chapter that: the use of stapled structures are favoured by investors due to the ability of investors to receive returns on a pre-tax basis; they are broadly comfortable with the traditional uses of stapled structures; the proliferation of stapled structures is the consequence of Government policy decisions to allow the taxation of passive income in investors hands; and the use of a stapled structure does not represent a high or low risk. However, the ATO do highlight their concerns around certain aspects of stapled structures which they consider may give rise to inappropriate benefits. These aspects include: 1. arrangements and transactions that result in an inappropriate shifting of income from the company to the trust, which can include arrangements such as: equity swaps which result in the property trust acquiring the right to a returns based on the operating company s economic performance; Kathryn Utting
12 excessive rental charges which substantially move the company s profits to the trust; cross-staple loans where the trust lends to the company at higher interest rates than the trust borrows the funds; different debt characteristics between the company and trust (e.g. interest rates and gearing levels); and inappropriate allocation of purchase price in newly privatised assets between the company and trust. 2. the restructure of existing non-stapled investments into a stapled investment, particularly where the restructure uses tax consolidation to obtain a step-up in the cost base of assets prior to splitting into a stapled structure. 3. arrangements which may constitute negative control and thus result in the trust being taxed as a Division 6C trust as opposed to a flow through entity (discussed further below). 4. the definition of associates and the application of the thin capitalisation provisions to stapled structures. 5. arrangements which attempt to fracture investment interests to negate control and thus avoid the application of Division 6C to the trust. FIRB and the ATO On 22 February 2016 the Australian Government announced a set of tax conditions that would be formally applied in the clearance of foreign investment proposals which represent a possible risk to Australia s revenue base 13. The conditions were aimed at ensuring foreign investors are compliant with Australian tax laws. The conditions initially announced went through a consultation process and as part of the recent Australian Federal Budget, the Government released final revised conditions. The revised conditions applied on FIRB applicants broadly are as follows: Applicants and their controlled group entities must comply with Australian tax laws and must provide any documents or information that is required to be provided to the ATO. Applicants must pay their outstanding Australian tax debts. Applicants must provide an annual report to FIRB to confirm compliance with the above conditions. Applicants must advise FIRB within 60 days of the occurrence of a termination event. A termination event occurs in a number of different circumstances such as where an applicant 13 Available at: Kathryn Utting
13 ceases to hold the interest the subject of the FIRB approval or ceases to control the entity or business the subject of the approval. Whilst the FIRB conditions apply broadly, due to the prevalence of foreign investors in the infrastructure sector, and the nature of assets involved, these conditions will need to be considered by foreign investors into Australian infrastructure projects. Indeed, given the ATO s move towards early engagement with investors in infrastructure assets, foreign investors may expect to be invited to engage with the ATO in the course of an acquisition, to discuss various aspects of the transaction, which may include: Where a staple is considered, the intended split of value across the operating company and the trust, and the cross staple transactions that will arise and how they will be priced; How the thin capitalisation provisions will apply to the acquired assets; and The upstream (i.e. foreign) structure of the investment funds and how a future exit will be treated for Australian tax purposes Negative Control One of the key tax provisions relevant to stapled structures is the potential application of Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936) which can result in a flow through trust being taxed similarly to a company. Thus the triggering of Division 6C negates some of the benefits that may arise from the flow through nature of a trust used by investors to undertake an infrastructure investment. In order for a trust to be captured by Division 6C, a unit trust must qualify as both a public unit trust and a trading trust. According to section 102N(1) in Division 6C of the ITAA 1936, a trust will be a trading trust if the trustee: controlled, or was able to control, directly or indirectly, the affairs or operations of another person in respect of the carrying on by that other person of a trading business. There is no legislative definition or case guidance on the concept of control in section 102N(1), so uncertainty surrounds its meaning. Infrastructure investments in Australia are commonly undertaken by bidder consortiums or via minority investments with investors utilising flow through trusts, to ensure that returns are taxed ultimately in investor s hands. In such circumstances, investors will typically seek protection of their interests via entering into equity holder agreements to provide themselves with the ability to restrict certain actions that may prejudice their equity interests, i.e. they may require veto rights to stop certain actions from occurring. The actions that veto rights are typically reserved over are not actions undertaken in the day to day operations of a trading business, but are moreso related to significant shareholder actions such as material divestments, changes to capital structures and distribution policies etc. Accordingly, there appears to be some disconnect between the control of a trading business that section 102N(1) is, quite rightly, intended to capture and the veto rights that minority investors in infrastructure projects may seek which do not go to the heart of the everyday operations of a trading business. The Commissioner has construed the concept of control widely. In ATO ID 2011/11, the Commissioner referenced Re The News Corporation Ltd and Others (1987), where it was provided Kathryn Utting
14 that the power to veto (a negative controlling action) is a power to restrain, and hence to control. The views expressed in the ATOID have been consistently applied across various private binding ruling requests over time. Accordingly, the Commissioner s view appears to be that the veto right protections employed by minority equity investors in infrastructure investments may confer on individual investors the negative control (and thus control) of the underlying trading business of the investment. Given the mismatch between the Commissioner s view in the ATOID and its applicability to the infrastructure sector, the Commissioner released a draft guidance paper on this issue in September This was done with the aim of providing greater certainty and clarity on the issue of negative control. In preparing the paper, the Commissioner invited public consultation on the matter. However, there seems to be consensus 14 that the draft guidance paper does not assist in clarifying the negative control issue. The paper largely reiterates arguments already put forward in ATO ID 2011/11, and many of the views of interested parties that were invited by the Commissioner were rejected. The Commissioner does not appear to have changed his position substantively. Uncertainty therefore continues to exist about whether, and in what circumstances, veto rights can deliver an investor control over a trading business. Indeed the ATO has reiterated its concerns around negative control in it recently released infrastructure framework. In the most recent chapter of the framework released, the ATO has stated that where an investor has a stake of 20% or more in an infrastructure investment it may allocate compliance resources to test whether conduct or informal understandings evidence control. Where the stake is 30% or more, ATO compliance resources will be allocated. Clearly this matter should continue to be monitored by infrastructure investors. The infrastructure framework also notes the ATO considers certain arrangements to fracture controls interests through upstream structuring (and thus negate negative or positive control) will give rise to a high compliance risk in the ATO s view Thin capitalisation In the infrastructure sector, investors typically finance investments with a high proportion of debt compared to equity due to the efficiencies provided by the use of debt capital over equity. Accordingly, the thin capitalisation rules in Division 820 of the Income Tax Assessment Act 1997 (ITAA 1997) must be explored by infrastructure investors. Broadly, the thin capitalisation rules operate to deny debt deductions relating to debt interests used to finance projects where the level of debt financing exceeds prescribed limits (60% of total assets). Within the realm of thin capitalisation, there are a number of areas that the ATO are focussing on but in particular to the infrastructure issue is the concept of associated entities. The difficulty in identifying which entities are associated entities for thin capitalisation purposes is increasing. Identifying associates can already be a difficult process as the tax legislation gives a broad and at times definition of associated entities. Additional complexity in an infrastructure context exists, primarily as a result of complex fact patterns and the increasing use of investment consortiums 14 Focus: Positive guidance on negative control? AllensLinklaters, September 2015; Negativing control implications of the tax authority s view of control for Australian infrastructure investment, Financier Worldwide, June Kathryn Utting
15 and minority holdings. The use of special purpose consortium vehicles has been a consistent feature of infrastructure investment in Australia, particularly after the global financial crisis. Consortium investors into infrastructure typically comprise a range of investors, including superannuation funds, pension funds, sovereign wealth funds and specialist fund managers. Depending on how consortiums are structured, investors may be considered associated entities and therefore may need to consider the application of the thin capitalisation rules when investing in infrastructure projects. This can arise even when members of a consortium are not controlled by foreign entities and not investing or operating internationally, the broad interpretation of the associate test can mean the thin capitalisation regime can still apply. The ATO has acknowledged in the infrastructure framework also that in applying the concepts of control in the thin capitalisation associate test, the Commissioner s views on negative control (discussed above) will again be applied where veto rights are held by investors. The same holding thresholds as apply to allocation of compliance resources for the negative control issue have been applied in allocating compliance resources to ascertaining whether an investor is an associate entity for thin capitalisation purposes, i.e. a 20% investor stake may attract compliance resources, whilst a 30% stake will attract such resources. The infrastructure framework also notes the ATO considers certain arrangements to fracture control interests through upstream structuring to break any nexus which would result in investors being considered associates will give rise to a high compliance risk in the ATO s view. Kathryn Utting
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