The federal government's budget proposal to change the capital gains tax (CGT) rules for managed investment trusts (MIT) is good news for superannuation funds, according to global professional services giant PricewaterhouseCoopers (PWC).
"It's great news for the MIT industry as it provides certainty around tax treatment of gains made by MITs," PWC partner Marco Feltrin said.
"The proposal is equally good news for superannuation funds that invest via MITs for the type of assets covered by the announcement."
In last week's budget, the government announced it would seek to allow MITs to make an irrevocable election to apply the CGT regime to certain assets, such as shares, units and real property.
If the MIT makes this election, eligible capital gains made by the MIT and distributed to residents would be entitled to the CGT discount.
Under the proposal, capital gains distributed to non-residents would be exempt from Australian tax unless the assets relate to taxable Australian property.
"This initiative will put an end to the longstanding debate about whether MITs make capital gains or normal income gains when they sell their assets," Feltrin said.
Under the current regime, super funds that invest directly receive CGT treatment on those assets and are eligible for a one-third CGT discount.
However, funds that invest indirectly through MITs do not have the same certainty and can risk losing the CGT discount on the gains.
"This proposal now provides certainty for super funds that invest via MITs, therefore removing the uneven playing field between direct investments and indirect investments for super funds," Feltrin said.
