There were limited announcements made that are relevant to the property and funds management industries in the MYEFO. The GST reverse charge mechanism for going concerns and farm land will be proceeded with and we still await details of the MIT reforms.
GST: Reverse charge for going concerns and farm land
The Government has announced 'reverse charge' rules relating to the sale of business and farm land. Currently a 'going concern' exemption is available for the sale of an operating business. For the sale of farms under the GST Act, it allows the sale to be treated as GST-free.
The 'reverse charge' rules originally announced by the Labor Government in the 2009-10 budget seek to remedy the problems facing between the interaction of the GST-free exemptions and other provisions of the GST Act. As a result the reverse charge rules look to treat the sale of a 'going concern' or 'farmland' as a taxable supply (taxed at 10%) and upon a written agreement between both parties, the GST on the sale can be 'reverse charged'. Therefore the GST is paid by the purchaser and not the vendor. The Liberal Government has confirmed that the legislation will be introduced in 2014 but no specific timing has been provided.
Managed Investment Trust ("MIT") Reform
No further announcements have been made regarding the MIT reforms. However, we are expecting the Government to continue the reform agenda. In particular the funds management industry is still waiting on legislative certainty in relation to:
- unders and overs;
- fixed trusts and how this interacts with the MIT definition;
- the introduction of a cost base uplift, where taxable income exceeds the cash distribution;
- the imposition of tax at trustee rates on trust distributions by MITs to non residents, where the taxable income exceeds the cash distribution (fund payment amount);
- the introduction of a new tax attribution system where MITs have clearly defined rights.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.