House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Change to managed investment trust final withholding tax rate

Outline of chapter

1.1 The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 amends the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 to increase the managed investment trust (MIT) final withholding tax from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012.

1.2 Schedule 1 to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 makes consequential amendments to the Taxation Administration Act 1953 to give effect to the increase in the MIT final withholding tax rate imposed by the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

Context of amendments

1.3 This amendment will increase the MIT final withholding tax from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012.

Summary of new law

1.4 The amendment will increase the MIT final withholding tax rate from 7.5 per cent to 15 per cent. The MIT final withholding tax rateof 15 per cent will apply to fund payments made in relation to income years that commence on or after 1 July 2012.

Comparis on of key features of new law and current law

Detailed explanation of new law

1.5 The rate of MIT final withholding tax is prescribed in subparagraph 4(1)(a)(ii) of the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 .

1.6 The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 will amend subparagraph 4(1)(a)(ii) to increase the MIT final withholding tax rate from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012. [ Schedule 1 to the Income Tax ( Managed Investment Trust Withholding Tax ) Amendment Bill 2012, item 1, subparagraph 4(1 )( a )( ii )]

Application and transitional provisions

1.7 The 15 per cent tax rate will apply to fund payments made in relation to income years that commence on or after 1 July 2012. [ Schedule 1 to the Income Tax ( Managed Investment Trust Withholding Tax ) Amendment Bill 2012, item 1, subparagraph 4(1 )( a )( ii )]

Consequential amendments

1.8 The MIT final withholding tax rate is a prescribed in subsections 12-390(3) and 12-390(6) of Schedule 1 to the Taxation Administration Act 1953 .

1.9 Schedule 1of to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 makes consequential amendments to subsections 12-385(3), 12-390(3) and 12-390(6) of Schedule 1 to the Taxation Administration Act 1953 to reflect the new 15 per cent final MIT withholding tax rate. [ Schedule 1 to Tax Laws Amendment ( Managed Investment Trust Withholding Tax)Bill 2012, items 1 to 3, subparagraphs 12-385(3 )( a )( iii ), 12-390(3 )( a )( iii ) and 12-390(6 )( a )( iii )]