Treasury recently published a draft Taxation Laws Amendment Bill, suggesting changes to the income tax treatment of disposal of assets within a collective investment scheme (CIS) or unit trust fund.

We gave an initial update on this last month, read the article here.

Subsequently, industry players were asked to make comments and in the draft response to the bill on 12 September 2018 the proposed amendments were put aside.

The main concerns were as follows:

  • Withdrawals by large unit holders can have a negative tax impact on other unit holders as well as the fund due to the tax liability created within the fund.
  • The suggested 12-month rule will hamper efficient portfolio management as all transactions such as unit holder withdrawals, rebalancing and index tracking falls within the scope of proposed changes.
  • An actuarial study is underway to do a quantitative impact assessment which cannot be completed within the submission deadline.

Treasury partially accepted the submissions and the bill has been withdrawn. Government and industry has been given more time to find a solution that may have less negative impact on unit holders. These amendments will be considered in the 2019 legislative cycle.

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