The changes include the provision to allow unintentional under or over attribution of net income in excess of the de minimis threshold to be carried forward.
Assistant treasurer David Bradbury said the further changes to the proposed new tax system would address concerns raised by the MIT industry during consultations.
“These changes will further reduce compliance costs under the new regime and provide certainty to taxpayers,” Mr Bradbury said.
As it currently stands, differences between taxable income and distributions within a five per cent ‘over or under’ range can be carried forward to the subsequent tax year.
Concerns had been raised by the industry that the prior proposed tax treatment of the under or over attribution of net income might be unreasonable under certain circumstances when compared to the tax profiles of many MIT investors.
While unintentional under or over attribution can be carried forward under the new arrangements, if the trustee is found to have caused the over or under “carelessly” or “recklessly”, they could face an administrative penalty.
In addition, the proposal addresses concerns that the ‘arm’s length’ rule unnecessarily applies to certain services provided to a MIT by a related entity.
The government has proposed to “carve out certain services from the application of the proposed arm’s length rule between a MIT and an associate of the MIT”.
This includes services provided by a related entity to a MIT that the MIT could perform itself without breaching EIB rules or services provided by the MIT’s responsible entity, which it could perform itself, but can’t due to requirements in the Corporations Act 2001.
