Managed Investment Trust Provisions

The proposed amendments to the Managed Investment Trust ("MIT") provisions will allow an Australian MIT to repatriate Australian-sourced net income of a MIT (other than dividends, interest and royalties) to foreign residents at concessional tax rates (i.e. after a three year transitional period, foreign residents will be subject to a final withholding tax liability of only 7.5 per cent). It is likely that foreign entities will consider the use of MITs to invest in PPP projects due to the favourable tax rates. Should a MIT be incorrectly characterised for tax purposes, the entity may fall outside the MIT provisions and be subject to the general trust provisions of Division 6 (with a substantially higher tax rate imposed on distributions to foreign residents).