The Australian Taxation Office (ATO) has released the form that a trustee of a managed investment trust (MIT) must complete to elect to have the investments of the trust assessed on capital account under the recent amendments (capital account election).
Where the capital account election is made by an eligible MIT, the capital gains tax (CGT) provisions should apply as the primary code to the gains and losses in relation to the following assets held by a MIT:
real property; and
right or option to acquire any of the above.
The trustee of a trust that became a MIT prior to the 2009-2010 income year can make an election by completing the following form:Managed investment trusts election for capital treatment.
In order for the capital account election to be effective, the form must be completed within the relevant timeframe and retained with the trust’s tax records. The form does not need to be lodged with the ATO.
The ATO has now advised that the due date for making the election for a trust that became a MIT prior to the 2009-2010 income year is 2 September 2010.
The ATO initially advised that the due date was 3 September 2010. The revised due date of 2 September 2010 now appears to be consistent with the express terms of the legislation.
Trusts that become a MIT in the 2009-2010 income year, or a later income year, can make the election by simply indicating so in their trust tax return within the first income year they become a MIT.
Further information in relation to the capital account election is available here.
It is important that trustees consider whether or not to make the election and, in doing so, have a process that takes into account all relevant considerations. These considerations include whether the trustee has the power to make the election.
They should make a detailed assessment of whether they qualify as MITs prior to the 2009-2010 income year, and whether (and by when) the capital account election should be made. The decision should be appropriately recorded, even if the decision is to not make the election.
Important considerations for a trustee to consider in determining whether to make the election include:
There are a number of complexities surrounding the application of the membership requirements for the purpose of determining whether a trust qualifies as a MIT, including membership interests held by IDPSs;
The capital account election is irrevocable; and
If the trust qualifies as a MIT, and an election is not made, the trust may be automatically assessed on revenue account in relation to the assets that qualify for capital account treatment under the capital account election.