The federal government has published a discussion paper on how the income tax system for managed investment trusts (MITs) will operate under its new framework.
"This paper is one further step in the government's plan to overhaul the taxation treatment of MITs and remove uncertainties," Minister for Financial Services Bill Shorten said.
"Once implemented, the government's reforms will increase certainty for managed funds, reduce complexity and lower costs for MITs and their investors," he said.
The government has already implemented two elements of the new tax system. Already, MIT trustees can apply the capital gains tax rules when they are disposing of eligible assets.
Furthermore, most foreign investors in an MIT will now be charged a lower final withholding tax rate of 7.5 per cent on the fund payments they receive.
Other aspects of the new system include an attribution tax system where investors will be taxed only on the income distributed to them by the trustee on a fair and reasonable basis, the establishment of an "over" and "under" mechanism where distributions can fall within a 5 per cent band either way without having to be revised, and the removal of situations where double taxation can arise.
Information about making a submission can be found on the Treasury website, with Monday 15 November being the final day submissions can be received.
The legislation is set to be introduced into parliament in early 2011.
The new laws will take effect on 1 July 2011.
